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41 Seattle U. L. Rev. 613 (2017-2018)
Flash Traders (Milliseconds) to Indexed Institutions (Centuries): The Challenges of an Agency Theory Approach to Governance in the Era of Diverse Investor Time Horizons

handle is hein.journals/sealr41 and id is 625 raw text is: Flash Traders (Milliseconds) to Indexed Institutions (Centuries): The Challenges of an Agency Theory Approach to Governance in the Era of Diverse Investor Time Horizons Harold Weston* & Conrad Ciccotello** INTRODUCTION One aspect of the problem in trying to align a corporate investment horizon (the time period for return on investment) to that of its shareholders is the enormous range of investor time horizons, which can range from milliseconds to centuries. Flash (high-frequency) traders hold shares for milliseconds, day traders for a few hours or days, some mutual funds and other institutional investors show a holding period limited to a few months to a year, and private equity and most mutual funds seem generally limited to three to five years. Beyond that, some actively managed mutual funds may be up to ten years, as evidenced by turnover ratios. Passively-managed index funds are oblivious to time periods, leaving that decision entirely to the index makers, which might range from a year or so for shifting indices like small cap value versus small cap growth sectors to total market indices that have few changes over ten to thirty years or longer. University endowments may have a century-length horizon.' Whose horizon controls? Should officers and directors be obliged to make decisions that will increase shareholder value (i.e. stock price) today or this week or this quarter or this year or this decade or this century or somehow weigh the various shareholders' diverse interests in * Clinical Associate Professor, Georgia State University, J. Mack Robinson College of Business and College of Law (secondary appointment). ** Professor and Director of the Reiman School of Finance University of Denver, Daniels College of Business. 1. DAVID F. SWENSEN, PIONEERING PORTFOLIO MANAGEMENT, AN UNCONVENTIONAL APPROACH TO INSTITUTIONAL INVESTMENT 2 (2000) [hereinafter SWENSEN, PIONEERING PORTFOLIO MANAGEMENT]. 613