Securing Our Nation's Economic Future: A Sensible, Nonpartisan Agenda to Increase Long-Term Investment and Job Creation in the United States

51 Pages Posted: 9 Dec 2015

See all articles by Leo Strine

Leo Strine

University of Pennsylvania Carey Law School; Wachtell, Lipton, Rosen & Katz; Columbia Law School - Ira M. Millstein Center for Global Markets and Corporate Ownership

Date Written: December 8, 2015

Abstract

These days it has become fashionable to talk about whether the incentive system for the governance of American corporations optimally encourages long-term investment, sustainable policies, and therefore creates the most long-term economic and social benefit for American workers and investors. Many have come to the conclusion that the answer to that question is no. As these commentators note, the investment horizon of the ultimate source of most equity capital — human beings who must give their money to institutional investors to save for retirement and college for their kids — is long. That horizon is much more aligned with what it takes to run a real business than that of the direct stockholders, who are money managers and are under strong pressure to deliver immediate returns at all times. Americans want corporations that are focused on sustainable wealth and job creation. But, there is too little talk accompanied by a specific policy agenda to address that incentive system.

This paper proposes a genuine, realistic agenda that would better promote a sustainable, long-term commitment to economic growth in the United States. This agenda should not divide Americans along party lines. Indeed, most of the elements have substantial bipartisan support. Nor does this agenda involve freeing corporate managers from accountability to investors for delivering profitable returns. Rather, it makes all those who represent human investors more accountable, but for delivering on what most counts for ordinary investors, which is the creation of durable wealth by socially responsible means.

The fundamental elements of this strategy to promote long-term American competitiveness include: (i) tax policy that discourages counterproductive behavior and encourages investment and work; (ii) investment policies to revitalize our infrastructure, address climate change, create jobs, and close our deficit; (iii) reforming the incentives of and enhancing the fiduciary accountability of institutional investors; (iv) reducing the focus on quarterly earnings estimates and improving the quality of information provided to investors; and (v) an American commitment to an international level playing field to reduce incentives to offshore jobs, erode the social safety net, and pollute the planet.

Keywords: short-termism, tax policy, infrastructure, climate change, institutional investors, benefit corporation, carbon tax, trading tax, basic research

Suggested Citation

Strine, Leo, Securing Our Nation's Economic Future: A Sensible, Nonpartisan Agenda to Increase Long-Term Investment and Job Creation in the United States (December 8, 2015). U of Penn, Inst for Law & Econ Research Paper No. 15-41, Available at SSRN: https://ssrn.com/abstract=2700334 or http://dx.doi.org/10.2139/ssrn.2700334

Leo Strine (Contact Author)

University of Pennsylvania Carey Law School ( email )

3501 Sansom Street
Philadelphia, PA 19104
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Wachtell, Lipton, Rosen & Katz ( email )

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New York, NY 10019
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212-403-1178 (Phone)

Columbia Law School - Ira M. Millstein Center for Global Markets and Corporate Ownership ( email )

435 West 116th Street
New York, 10027
United States

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