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Pension-Fund Shareholders

Short-term results and long-term performance are not irreconcilable, but are different, and will have to be balanced.

The new corporation will have to balance short-term performance with the long-term interests of pension-fund shareholders. Maximizing short-term performance will jeopardize the interests of pension-fund stockholders.

Significantly, the claim of the absolute primacy of business gains that made a shareholder sovereignty possible has also highlighted the importance of the corporation’s social function. The new shareholders whose emergence since 1960 or 1970 produced shareholder sovereignty are not “capitalists” in the traditional sense. They are employees who own a stake in the business through their retirement and pension funds. By 2000, pension funds and mutual funds in the U.S. had come to own the majority of the share capital of America’s large companies. This has given shareholders the power to demand short-term rewards. But the need for a secure retirement income will increasingly focus people’s minds on the future value of the investment. Corporations, therefore, will have to pay attention both to their short-term business results and to their long-term performance as providers of retirement benefits. The two are not irreconcilable, but they are different, and they will have to be balanced.

ACTION POINT: Manage your company so that it produces both short-term results and has strong results over the long term to satisfy the interests of pension-fund shareholders.

Managing in the Next Society
The Next Society (Corpedia Online Program)

* Source: The Daily Drucker by Peter F. Drucker

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