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This chapter is from the book

Investor Impatience

Not many years ago, most shares were held by what we called "investors," whose objective was long-run growth in share price and steady dividends. Of less consequence were traders, who played the market for very short-term profits. Increasingly, the distinction has disappeared. Pension funds seeking better returns and the enormous numbers of new shareholders expecting rapid growth of their share prices have transformed the stock market. Pressure for continuous growth in share price has become focused on quarterly shareholder value that may not even be tied to real income or earnings. "Good" companies must have predictable and regular increases in their bottom line. What should be normal, good and bad surprises, good and bad quarters or even years, came to be viewed as indicators of a very poor investment.

Many CEOs have rebalanced their priorities. They devote substantial attention to their company’s share price. Getting or maintaining personal prestige is part of the motivation, perceiving stock price as a measure of executive success. (Of course, as noted, stock prices directly relate to the size of the small fortunes that may be locked up in options.)

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