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MONTREAL – Canada and other world economies cannot continue to treat companies like commodities that can be bought and sold at a whim, says the head of the country’s second-largest pension fund.
In perhaps his strongest language yet on the subject of modern market capitalism, Michael Sabia, chief executive of the Caisse de dépôt et placement du Québec, said the model has to be changed – away from the short-term focus of money-making and towards a greater focus on long-term investment and company building.
“It’s not logical to determine the future of a company with only a perspective of maximizing its price in the short term,” Mr. Sabia told reporters after the Caisse reported a 13.1% return for 2013 on the back of soaring equity markets. “We cannot continue to treat companies like a commodity that can be bought and sold. We have to differentiate [investment] tourists from citizens.”
For six years after the 2008 financial crisis, a growing concert of key investors has been calling for a shift away from the focus on so-called quarterly capitalism.
According to Dominic Barton, the global managing director at McKinsey & Co., and Mark Wiseman, CEO at the Canada Pension Plan Investment Board, who wrote an article on the subject for the February issue of the Harvard Business Review, the topic is routinely on the meeting agendas of the OECD, the World Economic Forum and other international bodies. Yet the shadow of short-termism has continued to advance and the situation may actually be getting worse, the two men say.
In Canada, the debate is embodied in current discussion by provincial regulators over shareholder rights plans, or poison pills, which are devices that are used by companies facing unwanted takeover bids. Quebec’s securities watchdog has proposed changes that go well beyond what others have suggested, namely to let corporate directors decide what’s in the best interest of the company without the intervention of securities authorities.
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