Media Contacts:
Kathy Valentine CFA Institute - North America 434-951-5348                                        kathy.valentine@cfainstitute.org                          Jessica Galehouse CFA Institute - North America 434-951-5376 jessica.galehouse@cfainstitute.org		Brian Moriarty Business Roundtable Institute for Corporate Ethics 434-982-2323 moriartyb@darden.virginia.edu

Summary of Recommendations from CFA Centre, Business Roundtable Institute for Corporate Ethics Report, Breaking the Short-Term Cycle
- July 24, 2006

 
New York, July 24, 2006 – The Panel encourages corporate leaders, asset managers, institutional investors, and analysts to:

Earnings Guidance

1. End the practice of providing quarterly earnings guidance.
2. However, companies with strategic needs for providing earnings guidance should adopt guidance practices that incorporate a consistent format, range estimates, and appropriate metrics that reflect overall long-term goals and strategy.
3. Support corporate transitions to higher-quality, long-term, fundamental guidance practices, which will also allow highly skilled analysts to differentiate themselves and the value they provide for their clients.

Incentives and Compensation

1. Align corporate executive compensation with long-term goals and strategies and with long-term shareowner interests. Compensation should be structured to achieve long-term strategic and value-creation goals.
2. Align asset manager compensation with long-term performance and with long-term client interests.
3. Improve disclosure of asset managers’ incentive metrics, fee structures, and personal ownership of funds they manage.
4. Encourage asset managers and institutional investors to develop processes for ensuring that the companies in which they invest use effective, long-term, pay-for-performance criteria in determining executive compensation.
    

Leadership

1. Endorse corporate leadership in communicating long-term strategic objectives and related performance benchmarks rather than in providing quarterly earnings guidance.
2. Support analysts and asset managers in using a long-term focus in their analyses and capital investment decisions.
3. Promote an institutional investor focus on long-term value for themselves and when evaluating their asset managers.

Communications and Transparency

1. Encourage companies to provide more meaningful, and potentially more frequent, communications about strategy and long-term vision, including more transparent financial reporting that reflects a company’s operations.
2. Encourage greater use of plain language communications instead of the current communications dominated by accounting and legal language.
3. Endorse the use of corporate long-term investment statements to shareowners that will clearly explain—beyond the requirements that are now an accepted practice—the company’s operating model.
4. Improve the integration of the investor relations and legal functions for all corporate disclosure processes in order to alleviate the current bifurcated communications that confuse, rather than inform, investors and analysts.
5. Encourage institutional investors to make long-term investment statements to their beneficiaries similar to the statement the Panel is asking companies to make to their shareowners.

Education

1. Encourage widespread corporate participation in ongoing dialogues with asset managers and other financial market leaders to better understand how their companies are valued in the marketplace.
2. Educate institutional investors and their advisors (e.g., consultants, trustees) on the issue of short-termism and their long-term fiduciary duties to their constituents.
3. Support education initiatives for individual investors in order to encourage a focus on long-term value creation.
    

The full report and an executive summary are available online at:
www.corporate-ethics.org/pdf/Short-termism_Report.pdf

CFA Centre for Financial Market Integrity
The CFA Centre develops timely, practical solutions to global capital market issues, while advancing investors’ interests by promoting the highest standards of ethics and professionalism within the investment community worldwide. Established by CFA Institute as a distinct division with its own executive director and advisory council, the CFA Centre will build upon the CFA Institute 40-year history of standards and advocacy work, especially its Code of Ethics and Standards of Professional Conduct for the investment profession, which were first established in the 1960s. More information can be found at www.cfainstitute.org/cfacentre/

 
Business Roundtable Institute for Corporate Ethics
The Business Roundtable Institute for Corporate Ethics is an independent entity established in partnership with Business Roundtable—an association of chief executive officers of leading corporations with a combined workforce of more than 10 million employees and $4.5 trillion in annual revenues—and leading academics from America’s best business schools. The Institute brings together leaders from business and academia to fulfill its mission to renew and enhance the link between ethical behavior and business practice through executive education programs, practitioner-focused research and outreach. More information on the Institute can be found at www.corporate-ethics.org

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