Resumen de Loyalty-shares: Rewarding long-term investors.
In the face of growing concern about investors' excessive focus on quarterly earnings, recent research has found new evidence of the benefits of a committed long-term shareholder base, whether in terms of higher profitability, R&D investment, greater integration of ESG factors, or a reduced cost of capital. In light of this evidence, this article takes up the challenge of proposing a market solution to this problem. Although much has already been done in the financial industry to lengthen the outlook of executives by imposing longer vesting periods for stock options, a significant fraction of institutional shareholders continues to have a short-term orientation. The authors propose that companies try to attract a more long-term-oriented shareholder base by modifying the form of the common share contract to include a special reward for buy-and-hold investors. The type of contract proposed-called a 'loyalty share'-is a call-warrant attached to each share that is exercisable at a specified time-horizon-say, three years-and exercise price, but is nontransferable and hence has value only if the share is held for the entire length of the specified 'loyalty period.' Such a reward is expected to encourage a longer-term valuation outlook, since those shareholders seeking the loyalty reward are likely to be those who are most confident about the company's ability to increase its value through the expiration of the loyalty period. [ABSTRACT FROM AUTHOR]
