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How CEOs Can Fix Capitalism by Steven Prokesch, Raymond Gilmartin

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6

The Role of the Board

CEOs and Boards Need a Pact on How the Firm Will Be Run

The story is a familiar one: A company’s quarterly earnings fall significantly short of the investment community’s expectations, and the CEO announces a restructuring, including a cut in R&D, to lower costs, regardless of the negative impact on the firm’s long-term prospects. Another example of a CEO focusing on the short-term earnings rather than the creation of long-term value, right?

Not necessarily.

I believe that it is underappreciated how often CEOs are forced by their boards, either directly or indirectly, to take short-term actions that they deem not to be in the long-term interests of the company and all those it serves.

Because ...

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