Talent, Strategy, Risk

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A playbook for long-term value creation addresses the ongoing challenge of balancing short-term and long-term goals, particularly as boards face new pressures. With $14 trillion in assets managed by firms like Vanguard and BlackRock, a significant portion is held in index funds, leading to a powerful class of permanent institutional investors. These passive investors now own nearly 60 percent of the Fortune 500 and are vocal about their expectations. Influential figures like Larry Fink emphasize that focusing solely on short-term profits is no longer acceptable. Three industry leaders, who have engaged directly with boards and management, urge a reevaluation of total shareholder return (TSR). They propose shifting focus to a new TSR—talent, strategy, and risk—arguing that these elements are crucial for long-term value creation. The authors provide a framework for boards to manage these factors effectively, including analyzing business from a shareholder activist's perspective, guiding management toward a long-term vision, monitoring the execution of strategic goals, prioritizing major risks, and enhancing board diversity. In light of evolving corporate ownership dynamics, this authoritative guide equips boards to lead with a long-term focus.