Functions of Management It Can Research Proposal

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2) Because most organizations have finite resources, a CEO may be faced with two mutually exclusive investments, one with a good short-term payoff but no longer term value; the other with a good long-term payoff but no short run value. If the firm's results are shaping up to be disappointing over the next few quarters, significant conflict may arise for the CEO in trying to decide which alternative is best. Further, short-term orientation may directly benefit the CEO, who may have his/her compensation tied more to short-term performance.

There may be, however, some long-term benefits to satisfying the Street in the short-run.

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One potential benefit is with regards to the ability to raise capital. If the firm is experiencing strong short-term performance, their stock price should be higher, allowing them to raise more capital than they otherwise would. Moreover, if the short-term performance improvements flow through to the balance sheet, the company's cost of capital may also decrease as the risk associated with the company would be lower. Another potential advantage of satisfying the Street is that it may give the company more time to identify new opportunities that may ultimately have a higher payoff than did the initial long-term opportunity......

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