Gore says the goal is to reform capitalism to make it more sensitive to social and environmental issues.
Al Gore has yet another good idea that’s likely to be ignored by the business and political community: In the interest of economic and environmental sustainability, companies should be encouraged to focus on long-term rather than short-term investment goals by dropping the requirement to post quarterly earnings. Executive pay and bonuses could be linked to long-term performance, too.
Gore is chairman of Generation Investment Management (GIM), a London-based financial firm that pushes for socially and environmentally responsible investment practices. GIM has published a paper that suggests a number of such reforms. —ARK
[Gore] said: “Some of the ways in which [capitalism] is now practised do not incorporate sufficient regard for its impact on people, society and the planet. Capitalism in its current form is creating and fostering numerous challenges, not least short-termism, over-reliance on GDP growth as a primary metric of prosperity, rising inequality, increasing volatility in the global financial market, and growing contributions to the climate crisis.”
… In order to ensure that companies are run on a more sustainable basis, the pay and bonuses for senior managers should also be aligned with long-term rather than short-term performance, and include environmental and social indicators, according to the white paper. At present, “most compensation schemes emphasise short-term actions disproportionately and fail to hold finance professionals and corporate executives accountable for the ramifications of their decisions over the long term. Instead, financial rewards should be paid out over the period during which these results are realised, and compensation should be linked to fundamental drivers of long-term value, employing rolling multiyear milestones for performance evaluation.”