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Long-term ownership and value creation: A discussion paper

How can business owners steward their organisations for long-term value creation?

Chow Jau Loong, Dr Yancy Toh, Ong Boon Hwee
Stewardship Asia Centre

15 December 2020

 


The corporate world has long revolved around shareholder primacy. This has contributed towards short‑term thinking in the bid to outperform the market and secure quick investment gains. We are now seeing more evidence of the negative consequences of such a mindset — undervalued human capital and investment, diminished Gross Domestic Product, wealth inequality, political tensions as well as diminished innovation and brand equity. Cognisant of these issues, enlightened business and asset owners need to realise that they must think and act long-term to create value for stakeholders of today and tomorrow to achieve sustainable returns.

This paper hopes to address the question of how long-term owners can steward their organisations for long-term value creation and inspire long-term owners to cultivate a stewardship mindset that is quintessential for the continued success of businesses and the holistic well-being of the society.

Defined as "the longitudinal commitment of owners with stakes in the organisation to fulfil their legal and psychological obligations, driven by an intrinsic sense of responsibility and solidarity, to enable long-term transformation for value creation," this paper maps out five recommendations to long-term owners on generating long-term value creation. They are:

  • Act as a stabilising force: Be part of a stable shareholder base that helps create value for both company and its stakeholders.
  • Strive for strategic alignment: Promote sustained coherence between purpose, goals and strategies for long-term value creation.
  • Build long-term capacity: Develop capacity and capabilities for the shift from short-termism to long-termism.
  • Create a culture of ownership: Forge a culture that fosters co-ownership and shared growth.
  • Engage and communicate with stakeholders: Harness engagement as a mechanism to fulfil ownership obligations and stewardship responsibilities.

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