Board and CEO Advisory Partners

Tone at the Top: The Board’s Impact on Long-term Value


Taking a long-term approach in business leads to superior performance.

Companies that orient themselves around a long-term time horizon while also delivering against short-term objectives have been shown to outperform their peers on several key business measures, including revenue, earnings, economic profit, market capitalization and job creation. These companies were hit hard during the last major economic downturn—as were most businesses—but saw a higher-than-average rebound after markets recovered. According to one economic analysis, had short-term-oriented companies behaved more like long-term-oriented ones, the global economy would have created an additional $1.5 trillion in returns on invested capital in the years following the Great Recession. 1

While the benefit of long-termism is clear, the path to getting there is not. By all accounts, and for a variety of reasons, taking a long-term orientation in business can be difficult, especially for executives. But if the board of directors is committed to taking the long-view, there are a number of specific steps to they can take to get there, beginning with asking a key set of questions:

  • As a board, are we satisfied with our company’s performance?

  • Is the company being fully valued in the market?

  • Is the board playing an appropriate role in creating shareholder value?

Market valuation is a combination of two things: short-term performance and long-term potential. When executives over focus on one of the two – and directors don’t correct course – a company risks becoming either a flash in the pan, or a dreamer that fails to survive long enough to realize its vision. To avoid either fate, boards need to find the right balance between short-term and long-term issues, partner with executives to ensure the company is managed the same way, and engage with the market to build support for their vision and goals. It is no easy task.

Despite these challenges, there are companies that align around a long-term time horizonthat successfully oriented themselves this way. In these companies, management and the board share an explicit set of behaviors that focus themselves—and often the investors too—on the long term. How did this happen? And what differentiates those boards of directors that have been the most successful at focusing their company on the long term from those that have not?

There is a clear divide between companies that align for the long term and those that do not

In late 2019, Russell Reynolds Associates and FCLTGlobal (Focusing Capital on the Long Term) launched an extensive research effort to understand how corporate directors consider time horizons in their work; how the topic is discussed in the boardroom, facilitating alignment between and among management and the board and investors; and how a long-term orientation influenced director recruitment, assessment and selection. This research included an in-depth global survey of 163 corporate directors. Respondents hailed from all major industry segments and all corners of the world: Fifty-six percent of respondents were at companies headquartered in the Americas, 26 percent in Europe (including the United Kingdom), and 18 percent in the Asia Pacific region.

Short-Termers Management and Board Horizons


Companies where management focuses on delivering results on a zero-to-two-year time horizon, and the board expects the company to focus on delivering results on a zero-to-five-year time horizon. This group represents about 30 percent of directors surveyed.

Long-Termers Management and Board Horizons


Companies where management focuses on delivering results over a two-plus-year time horizon, and the board expects the company to focus on delivering results on a five-plus-year time horizon. This group represents about 20 percent of directors surveyed.

The remaining directors served on a board where directors and management were not aligned on their time horizon focus (i.e., management was long-term oriented, while directors were short-term oriented, or vice versa).

It is worth noting, of course, that different industries are influenced by different market forces, some of which naturally result in a bias toward being more short-term or long-term oriented. The data highlighted in this report is for all respondents, and all industries, combined. See Appendix for a breakout of results by geography and industry and a brief discussion of differences between and within certain industries.

While the two groups were identified based solely on their primary time horizons, as we analyzed their responses, we saw significant differences between short-termers and long-termers on almost 30 factors measured in the study—from why they decided to be board directors in the first place through to how they conduct themselves in the boardroom.


Motivations for Joining Board

Percentage of directors selecting motivation as “top 2”

Providing skills and experience to help the company succeed
Interested in the nature of the company or industry