An influential group of CEOs, business organizations, institutional investors, labor unions, corporate lawyers, accountants and consultants have signed off on a watershed set of guiding principles, The Aspen Principles, that commits them to encouraging and implementing long-term management and value creation strategies.
Key Provisions of The Aspen Principles:
– Companies to stop providing quarterly earnings guidance to analysts, and to not respond to analyst estimates.
– Corporate boards to communicate with “long-term oriented investors” on senior executive compensation.
– Requiring senior executives to hold stock they are given for at least some period beyond their tenure with the company, thus tying them to the long-term growth of the company.
– Banning senior executives from hedging the risk of stock options of long-term oriented compensation.
– Providing for “clawbacks,” which involve recouping senior executive compensation that was awarded based on the achievement of performance targets that were subsequently slashed or wiped out by corporate financial restatements.
The signing of the four-page document is the culmination of a two-year process spearheaded by The Aspen Institute Business and Society Program in collaboration with the Council of Institutional Investors and the Business Roundtable, an association of chief executive officers of leading U.S. companies with $4.5 trillion in annual revenues and more than 10 million employees.
It was prompted by concerns about the growing corrosiveness that short term pressures are having upon publicly traded companies and rising public sentiment against executive compensation.
The document is formally titled “Long-term Value Creation: Guiding Principles for Corporations and Investors.”
Says Judith Samuelson, Executive Director of The Aspen Institute Business and Society Program, “This is an important step forward in managing for the long term. We’ve built these principles on the foundation laid by many other organizations and individuals. What we have added to their efforts is the commitment of diverse stakeholders to work together to change business practices, investment practices and policy in support of long-term competitiveness.”
The following organizations are signing on:
AFL-CIO
Apache Corporation
Business Roundtable
CalSTRS
Council of Institutional Investors
PepsiCo, Inc.
Pfizer, Inc.
Center for Audit Quality (representing the audit profession)
NY State Common Retirement Fund
Office Depot
TIAA-CREF
Xerox Corp.
William H. Donaldson, Donaldson Enterprises, Inc
Patrick W. Gross, The Lovell Group
Ira Millstein, Wiel, Gotshal & Manges, LLP and Senior Associate Dean, Corporate Governance,
Yale School of Management
John Olson, Gibson, Dunn & Crutcher, LLP
Henry B. Schacht, Warburg Pincus
About the Aspen Institute:
The Aspen Institute Business and Society Program (BSP) is dedicated to developing leaders for a sustainable global society. Through dialogues and path-breaking research, BSP creates opportunities for executives and educators to explore new pathways to sustainability and values-based leadership.
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