CEOs are increasingly frustrated by the short-term orientation of investors. They say markets underappreciate long-term investments and ignore issues like employee and customer welfare, while pressuring companies to make decisions that maximize short-term earnings and stock prices. CEOs are perhaps right that some investors are short-term oriented and, as a result, damage the long-term success of businesses. However, according to research by our organizations – KKS Advisors and The Generation Foundation – few CEOs are providing materially relevant information to investors that would encourage long-term oriented capital allocation.
The UPower founders, Jake DeWitte and Caroline Cochran, were recent graduates from MIT's Nuclear Science and Engineering Department. They chose to attend Palo Alto-based Y Combinator's accelerator program to focus on building a "mini" nuclear reactor that would produce up to ten MWt and could fit in two 40-foot intermodal shipping containers.The UPower reactor was designed to serve the need for "off-grid" electric power. These off-grid customers were in remote locations such as mining operations, military bases, Arctic townships or even island nations. While DeWitte and Cochran were ecstatic about the progress they had made and the enthusiastic open-mindedness of Bay Area investors to backing groundbreaking and even potentially contentious "big ideas," they wondered if their investors would have the patience to finance UPower over the long term.
An essential element of capitalism is corporate reporting. Today's capitalism is supported by financial reporting. Critics of today's capitalism argue that it is too short-term oriented and rewards companies for creating negative externalities. Integrated reporting can play an important role in changing this since it is focused on the material issues that affect a company's ability to create value over the short, medium, and long term. Each country must take its own path to integrated reporting. This is illustrated by analyzing the different regulatory and legislative regimes in the United States and the European Union.
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