Short-Termism: What You Could Do Tomorrow Will Largely Depend on Your Doing Today

Both during the global financial crisis (GFC) and particularly during Covid-2019, Board life changed. Initially more time was allocated to Board routines, even if workplace and workgroup technologies helped make it efficiently. Short-term orientation strongly emerged, even more while in Covid. Reputational perspective was very relevant (e.g., due to the impact of social media during the pandemic), potentially affecting management latitude and decision quality. External adversity may exacerbate short-term oriented behavior and affect decision-making, potentially threatening Boardroom long-term focus. Postponing strategic issues brings opportunity costs and might weaken competitive position. There are, however, confronted views suggesting no evidence exists of such short-termism according to measures of long-term performance. Anyhow, concentrating on the short term to prepare later strategic moves is a classical sequence in crisis, even if there may be some factors mediating this short-term focus, like the specific crisis impact on the focal industry or company structure of stockholders and their aversion to risk. Most Directors describe similar goals during crises: protecting the balance sheet (especially liquidity) at any cost. To do so, reactions may be split into four main categories: (a) Cost cutting (i.e., SGA expense and headcount reduction), (b) Working capital and cash investment reductions, (c) Selective divestiture (e.g., sale of underperforming or non-core assets). In addition to those, there are other more purely short-termist reactions in the face of crisis like (d) divesting critical assets. Two reasons appear behind this short-term oriented behavior: (a) bounded rationality, evoking our limitations in cognition and, from the organizational/social perspective, (b) the limited amount of time and energy devoted by Directors to Board activity.