Efforts to try to make business more about long-term outcomes, rather than short-term speculation have gathered pace in recent years, but policymakers should be looking more at family businesses for answers on how to develop a long-term approach to business.
Lawrence Summers, the former US treasury secretary and Harvard professor, wants global capitalism to be more about long-term outcomes for all stakeholders in the business. In a recent column for the Financial Times he said: “The goal is for companies and shareholders to operate with longer horizons…” Hillary Clinton, running to be the next president of the US, is looking at taxing short-term investors more to try to encourage long-term investing. And a new pressure group, backed by heavyweights from the world of business and politics called the Coalition of Inclusive Capitalism is pushing the case for businesses to think more about long-term outcomes. The movement towards businesses being more about the long term is gathering pace, and this is to be welcomed.
But more needs to be done to promote family businesses as part of this long-termism thinking. So far, it would appear, much of the effort is being concentrated on the listed sector, where moves like Clinton’s tax idea are effectively aimed at stock market investors. And other initiatives are about ending quarterly, or even bi-annual stock market reporting for listed firms – again, the listed sector.
Most family businesses, listed or not, will agree with efforts to cut short-term speculative investing. Nevertheless, they want to see more action on tax relief for debt finance – and some are advocating tax breaks for equity holders like themselves. They argue the carried interest tax advantage for private equity firms and hedge funds should be cut, if not completely abolished.
Also, say family business groups, most of those advocating long-termism talk little about giving family firms, which have been about long-term for years, tax breaks. Groups like European Family Business in Brussels say equity ownership should be given greater recognition, if not, tax benefits.
So, maybe it’s about time policymakers also start listening to family businesses when they are advocating businesses adopt long-termism. After all, many family businesses have been quietly following such an approach for years – and getting little recognition for doing so.