Long‐term stewardship and our capital markets

This paper aims to look at the three areas of corporate governance, intellectual capital and strategic business valuation from the perspective of a long‐term value investor.

The paper begins by briefly laying out the investment tenets of a long‐term value investor and then proceeds to align long‐term value investing with long‐term stewardship of economic resources. The paper is a transcript of a keynote presentation delivered at the 1st McMaster World Congress on Strategic Business Valuation.

In the area of intellectual capital the paper points out that the concept of intellectual capital falls far short of the fuller and more necessary view on intellectual knowledge which should be replaced or at least augmented with the notion of wisdom.

Any notion of strategic valuation or pricing of assets based on their economic value will be significantly impacted by one's investment principles and time horizon. The paper mentions two examples of inefficiencies in the market due to divergent time horizons. The two examples discussed are income trusts and principal protected notes.

One's investment philosophy or principles which largely determine time horizon will have a significant impact on how one approaches the important areas of corporate governance, intellectual capital and strategic business valuation. The concern of the paper is to the extent that we have become more short‐term in our investment principles; this will have serious long‐term negative impacts on the capital markets.