Eyes on the Horizon? Fragmented Elites and the Short-Term Focus of the American Corporation

Recent scholarship expresses concerns that U.S. corporations are too focused on short-term performance, undermining their long-term competitiveness. The authors examine how short-term strategies and performance, or short-termism, results from the dissolution of the American corporate elite network. They argue that the corporate board interlock network traditionally served as a collective resource that helped corporate elites to preserve their autonomy and control, mitigating short-termism. In recent years, changing board-appointment practices have fractured the board network, undermining its usefulness as a platform for collective action and exposing corporate leaders to short-term pressures. The authors develop and apply a cohesion metric for network managerialism, derived from theory and evidence in social-network scholarship. Using three indicators that capture short-termism earnings management and shareholder returns, the authors identify a structural basis for short-termism that links network-based resources to managers’ decisions. The results highlight the benefits of the corporate elite network and illustrate unforeseen consequences of the network’s dissolution.