Investors

Research: Investors Punish Entrepreneurs for Stereotypically Feminine Behaviors
Francesco Carta fotografo/Getty Images “I would not be caught dead in a pink suit now,” says Susan Perry, the founder of SpeechMED, a startup that translates complex medical information into language patients can understand. Clothing is just one of the issues Perry has reconsidered when it comes to how she pitches her business. As a middle-aged woman, she has faced bias because she doesn’t fit the stereotype of what an entrepreneur looks like. Raised to be soft-spoken, Perry now makes a conscious effort to lower her voice, plant her feet firmly, and speak directly. When she [...]
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Why CEOs Should Share Their Long-Term Plans with Investors
Fanatic Studio/Getty Images Many people have suggested moving away from quarterly earnings reporting as a way to reduce short-termism. But such a change would probably not change how resources are allocated or businesses operate. Rather than requiring less short-term information, we believe the key to combating short-termism is to encourage companies to share more information about their long-term plans. When asked why companies don’t talk more about the long term, CEOs often complain about the short-term orientation of investors. Similarly, investors complain that companies don’t [...]
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Activist Hedge Funds Aren’t Good for Companies or Investors, So Why Do They Exist?
akindo/Getty Images Activist hedge funds have become capital market and financial media darlings. The Economist famously called them “capitalism’s unlikely heroes” in a cover story, and the FT published an article saying we “should welcome” them. But they are utterly reviled by CEOs. And at best, their performance is ambiguous. The most comprehensive study of activist hedge fund performance that I have read is by Yvan Allaire at the Institute for Governance of Private and Public Organizations in Montreal, which studies hedge fund campaigns against U.S. companies [...]
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What CEOs Get Wrong About Activist Investors
Benjamin Harte/Getty Images We were shareholder activists once. For two years, we conducted an activist campaign at Tejon Ranch, the largest private landowner in California and a publicly traded company. We earned a 13% return — not bad by industry standards — but we failed to change the company much. We wrote about our adventure nearly a year ago in The Atlantic, but as we thought more about our interaction with Tejon Ranch’s managers, we realized there were valuable lessons that we wanted to share with the corporate leaders who are likely to confront the risk of [...]
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Research: Activist Investors Are More Likely to Target Female CEOs
Cristina Marx/EyeEm/Getty Images Mary Barra, Meg Whitman, Indra Nooyi: These are just three of the women who have successfully broken through the notorious “glass ceiling” to become CEOs of large public firms. Although women are still underrepresented at the top of corporations, there is growing interest in understanding whether men and women have different experiences as CEOs. Our research examined whether male and female CEOs are treated differently by activist investors, who pressure firms to alter or change their strategic policies and decisions. We found that female CEOs fac [...]
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What Investors Need to Know About Zimbabwe After Mugabe
ALEXANDER JOE/Getty Images After being denounced for years for its dictatorship and destructive economic policies, Zimbabwe entered a new chapter in November 2017, following the military’s removal of president Robert Mugabe, who ruled the country for 37 years. Mugabe’s ouster and replacement with his one-time deputy, Emmerson Mnangagwa, was the most significant development in the Southern African nation since it gained independence from Britain in 1980. Mnangagwa is clear that he wants to rebuild the economy and start fresh with foreign businesses. This is promising for a market [...]
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Why GE’s Jeff Immelt Lost His Job: Disruption and Activist Investors
YASUYOSHI CHIBA/Getty Images Jeff Immelt ran GE for 16 years. He radically transformed the company from a classic conglomerate that did everything to one that focused on its core industrial businesses. He sold off slower-growth, low-tech, and nonindustrial businesses — financial services, media, entertainment, plastics, and appliances. He doubled GE’s investment in R&D. In his Harvard Business Review article summing up his tenure, Immelt recalls that the two things that influenced him most were Marc Andreessen’s 2011 Wall Street Journal article “Why Sof [...]
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What BMW’s Corporate VC Offers That Regular Investors Can’t
In 2012, one of us — Gregor Gimmy, a California-based serial entrepreneur and former IDEO consultant — accepted a new role at BMW’s corporate R&D headquarters. Gimmy’s task was clear but highly demanding: to reimagine the way BMW innovates. At the time, BMW had no dedicated, company-spanning unit to leverage the creative power of startups. This meant that the company was leaving out huge innovation potential — thousands of startups with billions of funding — that could help BMW innovate anything from core vehicle technology (batterie [...]
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The Answer to Short-Termism Isn’t Asking Investors to Be Patient
Tim Evans for HBR Short-term corporate behavior is a major problem in the 21st century firm. Too many companies prioritize quarterly earnings over long-term innovation, human capital investment, and brand development, and many people believe short-term shareholders are to blame. The popular argument goes as follows: Short-term investors – those who hold onto a stock for less than, say, a year – aren’t interested in the company’s prospects beyond that year. So, if the company misses its quarterly earnings target, they sell their shares. The fear of such selling forces [...]
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Research: The Rise of Superstar Firms Has Been Better for Investors than for Employees
Few things are stable in economic life. Sixty years ago, Nicholas Kaldor laid down one seemingly immutable fact: The share of the national income taken by labor was constant. In other words, every year workers took home around two-thirds of the economic pie, and the owners of capital took the rest. The stability of this ratio was, as his fellow Cambridge economist Lord Keynes said, “something of a miracle.” So much for miracles. In America, labor’s share has been on the decline for about three decades, and it has accelerated since the turn of the century. The fall has al [...]
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What If Investors Who Held Their Shares Longer Got More Voting Power?
Joe Bower and Lynn Paine “had me at hello” (to quote Jerry Maguire) with their new HBR article, “The Error at the Heart of Corporate Leadership.” Laying out their data, they find that long-term oriented companies create more financial value and more jobs. In fact, if more American companies were focused on the long term, they estimate, investors would have an additional $1 trillion, workers would have an additional 5 million jobs, and the country would have more than an additional $1 trillion in GDP. I agree with their vision of a future in which more companies focus on [...]
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How Investors React When Companies Announce They’re Moving to a SaaS Business Model
On April 23, 2012, Adobe Inc. launched a Software-as-a-Service (SaaS) subscription version of its key product line, Creative Suite, causing its net income to plummet by almost 35% percent the following year. Yet by April 2016 Adobe’s stock price had nearly tripled from its value four years earlier. Adobe’s radical transformation from a product-based business model to a service-based one raised eyebrows in the industry, with many software vendors now wondering how radically they should approach the SaaS model. Due to the fast growth of the SaaS market and the high valuations of [...]
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