Dec. 8, 2016
Winners of 2016 IRRC Institute Research Award Examine Controversial Investor Issue of Short-Termism
Press Release • December 7, 2016
NEW YORK, NY, December 7, 2016 – Two research papers that have the potential to reshape investor thinking on the detrimental impacts of short-term investing have won the Investor Responsibility Research Center Institute (IRRCi) annual investor research competition. The winners will be presented today at the Columbia Law School’s 2016 Millstein Governance Forum, Governance, Leadership and the Future of the Corporation, in New York City. In addition, each winning research team will be presented with a $10,000 award.
“The two winning research papers get at the heart of a key issue facing the economy, investors and companies – short-termism,” said Jon Lukomnik, IRRCi executive director. “Both research papers offer important contributions to the global debate on the need for businesses to maintain a long horizon focus in a short-term world, as well as the benefits of such a long-term focus for investors and companies alike. The two Honorable Mention winning papers also are significant in that they find that chief executive officer (CEO) pay is not linked to performance, and that greater shareholder input into corporate boards via increased proxy access increases company value,” Lukomnik explained.
The winning practitioner research paper, “The ‘Science’ and ‘Art’ of High Quality Investing” is co-authored by Dan Hanson, partner with Jarislowsky Fraser Global Investment Management and lecturer at UC Berkeley Haas, and Rohan Dhanuka, who previously was with the firm. The research examines the issue of “quality”. It finds that investors with a short-term focus tend to undervalue intangible assets — the kind that don’t show up on corporate balance sheets, such as the payoffs from corporate R&D spending, advertising and patent citations. Alternatively, investors and managers who take a long-term view have an opportunity to identify opportunities missed or underpriced by a world focused on the here and now.
“It’s not just Wall Street that chases the short-term. For all the talk about ‘long-termism,’ quantitative finance still often relies on short-term mean-reversion studies. We brought the long-term stewardship perspective that we have as investors to a study of quality and environmental, social and governance (ESG) issues, and we show that—if done right—there can be alpha in a high quality, long-term, ESG approach,” said award winner Hanson. “We are honored to be recognized by IRRCi, and we are pleased to donate prize proceeds to the Global Initiative for Sustainability Ratings (GISR) and Sustainable Accounting Standards Board (SASB), both pioneers in market-driven approaches to improving ESG disclosures.”
Click here to read the complete IRRCi news release.