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We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. I know that doesn’t sound supe

by eries 6y ago

We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. I know that doesn’t sound super sexy but we believe this is a high-leverage point for reforms We will have more to say on reforms that relate to reading in the future, but we don’t limit the ability of “tourists” to trade in and out of stocks as normal.

rglover 6y ago
Will those corporate governance guidelines be publicly available? Are shareholders able to influence these guidelines at all?
- eries 6y ago
  Yes all of our listing standards are publicly available both on our website and in numerous legal filing Yes, we believe in the role of long-term shareholders in corporate governance
jbob2000 6y ago
What do you define as long term? At some point, the best answer for longevity is for a company not to exist at all, given that the purpose of most companies is extraction, or some sort.
- eries 6y ago
  We will endeavor not to list such companies
  - levi- 6y ago
    > We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. How will you handle companies that eventually go against the required guidelines? Could a company become permanently unlisted? And how would that affect any shareholders of the company who purchased through LTSE?
    - eries 6y ago
      Yes, we have the power to delist companies, although I hope it never comes to that. Shareholders would have their ownership protected in that scenario (as they still own common shares), same as any other company who was delisted from an exchange
maerF0x0 6y ago
>We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. I've heard many a company say one thing and act another. How will this be different? Will delisting be the repercussion of short termism?
- eries 6y ago
  Yes, all of our standards are enforceable, that’s part of the responsibility of being an SRO. When a company makes promises as part of listing on LTSE, the public can believe them
  - GordonS 6y ago
    Nothing here seems very "concrete" TBH, it all seems quite "hand wavy" and vague. Can you provide any specific examples of standards that could be enforced, and how?
    - eries 6y ago
      https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
  - alasdair_ 6y ago
    Let’s say the largest flagship company on LTSE decides to move to short-term governance strategies. How can investors be sure this company really would be delisted, even if it’s the company that makes LTSE the most money?
    - eries 6y ago
      Everything we do is completely transparent. If a company deliberately violates the policies they have publicly adopted, not only would they be delisted they would likely be committing securities fraud. I think it's likely you'd hear about it. You imply rather than state directly that you fear our regulatory decisions would be influenced by our commercial interests, so just to address that part, we have an extensive set of checks and balances in our own corporate structure that double-buffer these decisions.
safog 6y ago
What does that mean concretely? Will earnings reports still be quarterly? I guess I'm trying to figure out why the exchange has to do anything here. There's plenty of investors and companies that think long term with BRK and its investors being the most prominent. Digging a bit more, on the investor side, there are value investors who look for solid, if unspectacular businesses at a price point and buy and hold over long periods of time. On the company side, there are exceptional founder run businesses like Amazon, FB etc. that don't care very much what things look like in the short term (Bezos claims he's willing to be misunderstood for long periods of time for example).
- eries 6y ago
  I’m not quite sure how to answer your question. Clearly there are long-term investors and companies in today’s markets. I think there would be more of them if they had a platform conducive to their philosophy.
  - Loughla 6y ago
    >Clearly there are long-term investors and companies in today’s markets. That's not really an answer to the question - so how do you define long-term, and how do you take reports? Are they still quarterly reports? Or are the reports longer-term? How do companies prove they're long-term to interact with your platform? You haven't really talked about the concrete definitions or parameters around 'long-term' in this thread. Please do, it would be nice.
    - eries 6y ago
      Quarterly reporting is an SEC requirement, so we don't affect that. We do require certain additional reports be filed on an annual basis. Companies prove their long term by adopting policies responsible to our long-term principles. The way this works is spelled out in a lot of detail both on our website and in our regulatory filings. Here's more of a layman's overview: https://longtermstockexchange.com/static/principals_for_lt_success_white_paper-52e153e1e0be49bd178f74475f274ef0.pdf https://longtermstockexchange.com/static/principals_for_lt_s...
bobcostas55 6y ago
Given that companies like Uber, which are not only unprofitable but don't even have a clear path to profitability at any time horizon, trade at fairly high valuations, what's the basis for the belief that investors are irrationally focused on short-term results? Should Uber actually trade at higher valuations than it does today? Why isn't some rational subset of investors capitalizing on this opportunity?
- eries 6y ago
  I don’t think multiples are the issue. The question is: are companies set up to support a philology of long-term decision making? Talk to almost any middle manager in any public company in America if you are confused about whether this is the common case today
  - bobcostas55 6y ago
    If investors are not irrational about the long term, then I don't see how there can be a problem. Prices will correctly reflect long-term expectations, and managers who are paid in options/hold equity will face the right set of incentives. If managers focus on the short term it's probably because it maximizes long-term value.
    - eries 6y ago
      There's a lot of literature on this topic, and many empirical studies that call these assumptions into question. Just picking one at random from the set I've seen recently: https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%24FILE/Short-termism_raport_EY.pdf https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%...
      - deleted 6y ago
        [deleted]
    - jxramos 6y ago
      It's kind of interesting to think about growth profiles over time. To grow over some long term span, like say 10 or 20 years, did the growth all take place in the last 90% of the interval or evenly throughout. I guess the premise of a company growing throughout all the short intervals across a long span of time is a good way to know at least something will be there down the road that's not too far off the mark from where you'd like to be with your investments. I'm trying to think of the reconciliation of short term vision with any wisdom contained therein with respect to long term gains.
mc32 6y ago
This might not be a great comparison, however, when Japan was ascendant some of that might was attributed to their “long-view”. Companies on the nikkei were government backed and didn’t have the same quarterly results demands seen in other exchanges... and that was proven right to about the mid-90s. Then it was revealed that those companies on occasion invested in areas they had no expertise or had poor returns. Not that the current system of chasing quarterly results is good, but how is the Japanese experience avoided?
- eries 6y ago
  As with everything, there is a delicate balance to be maintained. Toyota is an interesting example from the Japanese context. Luckily (?) things are today so out of whack that I don't think we have to worry about overcorrecting - for now.
bmh100 6y ago
Will the exchange impose any restrictions on the buying or selling of stock?
- eries 6y ago
  We offer the same level of liquidity as incumbent exchanges, per SEC requirements
sbilstein 6y ago
Why is a new exchange the right model for this rather than lobbying for different SEC requirements?

by eries 6y ago

rglover 6y ago

Will those corporate governance guidelines be publicly available? Are shareholders able to influence these guidelines at all?

eries 6y ago
Yes all of our listing standards are publicly available both on our website and in numerous legal filing Yes, we believe in the role of long-term shareholders in corporate governance

jbob2000 6y ago

What do you define as long term? At some point, the best answer for longevity is for a company not to exist at all, given that the purpose of most companies is extraction, or some sort.

eries 6y ago
We will endeavor not to list such companies
- levi- 6y ago
  > We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. How will you handle companies that eventually go against the required guidelines? Could a company become permanently unlisted? And how would that affect any shareholders of the company who purchased through LTSE?
  - eries 6y ago
    Yes, we have the power to delist companies, although I hope it never comes to that. Shareholders would have their ownership protected in that scenario (as they still own common shares), same as any other company who was delisted from an exchange

maerF0x0 6y ago

>We require companies that list with us to adopt corporate governance that aligns their behavior and incentives to the long term. I've heard many a company say one thing and act another. How will this be different? Will delisting be the repercussion of short termism?

eries 6y ago
Yes, all of our standards are enforceable, that’s part of the responsibility of being an SRO. When a company makes promises as part of listing on LTSE, the public can believe them
- GordonS 6y ago
  Nothing here seems very "concrete" TBH, it all seems quite "hand wavy" and vague. Can you provide any specific examples of standards that could be enforced, and how?
  - eries 6y ago
    https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf https://www.sec.gov/rules/sro/ltse/2019/34-86327.pdf
- alasdair_ 6y ago
  Let’s say the largest flagship company on LTSE decides to move to short-term governance strategies. How can investors be sure this company really would be delisted, even if it’s the company that makes LTSE the most money?
  - eries 6y ago
    Everything we do is completely transparent. If a company deliberately violates the policies they have publicly adopted, not only would they be delisted they would likely be committing securities fraud. I think it's likely you'd hear about it. You imply rather than state directly that you fear our regulatory decisions would be influenced by our commercial interests, so just to address that part, we have an extensive set of checks and balances in our own corporate structure that double-buffer these decisions.

safog 6y ago

What does that mean concretely? Will earnings reports still be quarterly? I guess I'm trying to figure out why the exchange has to do anything here. There's plenty of investors and companies that think long term with BRK and its investors being the most prominent. Digging a bit more, on the investor side, there are value investors who look for solid, if unspectacular businesses at a price point and buy and hold over long periods of time. On the company side, there are exceptional founder run businesses like Amazon, FB etc. that don't care very much what things look like in the short term (Bezos claims he's willing to be misunderstood for long periods of time for example).

eries 6y ago
I’m not quite sure how to answer your question. Clearly there are long-term investors and companies in today’s markets. I think there would be more of them if they had a platform conducive to their philosophy.
- Loughla 6y ago
  >Clearly there are long-term investors and companies in today’s markets. That's not really an answer to the question - so how do you define long-term, and how do you take reports? Are they still quarterly reports? Or are the reports longer-term? How do companies prove they're long-term to interact with your platform? You haven't really talked about the concrete definitions or parameters around 'long-term' in this thread. Please do, it would be nice.
  - eries 6y ago
    Quarterly reporting is an SEC requirement, so we don't affect that. We do require certain additional reports be filed on an annual basis. Companies prove their long term by adopting policies responsible to our long-term principles. The way this works is spelled out in a lot of detail both on our website and in our regulatory filings. Here's more of a layman's overview: https://longtermstockexchange.com/static/principals_for_lt_success_white_paper-52e153e1e0be49bd178f74475f274ef0.pdf https://longtermstockexchange.com/static/principals_for_lt_s...

bobcostas55 6y ago

Given that companies like Uber, which are not only unprofitable but don't even have a clear path to profitability at any time horizon, trade at fairly high valuations, what's the basis for the belief that investors are irrationally focused on short-term results? Should Uber actually trade at higher valuations than it does today? Why isn't some rational subset of investors capitalizing on this opportunity?

eries 6y ago
I don’t think multiples are the issue. The question is: are companies set up to support a philology of long-term decision making? Talk to almost any middle manager in any public company in America if you are confused about whether this is the common case today
- bobcostas55 6y ago
  If investors are not irrational about the long term, then I don't see how there can be a problem. Prices will correctly reflect long-term expectations, and managers who are paid in options/hold equity will face the right set of incentives. If managers focus on the short term it's probably because it maximizes long-term value.
  - eries 6y ago
    There's a lot of literature on this topic, and many empirical studies that call these assumptions into question. Just picking one at random from the set I've seen recently: https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%24FILE/Short-termism_raport_EY.pdf https://www.ey.com/Publication/vwLUAssets/EY_Poland_Report/%...
    - deleted 6y ago
      [deleted]
  - jxramos 6y ago
    It's kind of interesting to think about growth profiles over time. To grow over some long term span, like say 10 or 20 years, did the growth all take place in the last 90% of the interval or evenly throughout. I guess the premise of a company growing throughout all the short intervals across a long span of time is a good way to know at least something will be there down the road that's not too far off the mark from where you'd like to be with your investments. I'm trying to think of the reconciliation of short term vision with any wisdom contained therein with respect to long term gains.

mc32 6y ago

This might not be a great comparison, however, when Japan was ascendant some of that might was attributed to their “long-view”. Companies on the nikkei were government backed and didn’t have the same quarterly results demands seen in other exchanges... and that was proven right to about the mid-90s. Then it was revealed that those companies on occasion invested in areas they had no expertise or had poor returns. Not that the current system of chasing quarterly results is good, but how is the Japanese experience avoided?

eries 6y ago
As with everything, there is a delicate balance to be maintained. Toyota is an interesting example from the Japanese context. Luckily (?) things are today so out of whack that I don't think we have to worry about overcorrecting - for now.

bmh100 6y ago

Will the exchange impose any restrictions on the buying or selling of stock?

eries 6y ago
We offer the same level of liquidity as incumbent exchanges, per SEC requirements

sbilstein 6y ago

Why is a new exchange the right model for this rather than lobbying for different SEC requirements?