Marc Goedhart, Tim Koller [Archive.org URL]

There are many trade-offs that company managers struggle to make, in which neither a shareholder nor a stakeholder approach offers a clear path forward. This is especially true when it comes to issues affecting people who aren’t immediately involved with the company. These so-called externalities—perhaps most prominently, a company’s carbon emissions affecting parties that otherwise have no direct contact with the company—can be extremely challenging for corporate decision making because there is no objective basis for making trade-offs among parties.

That’s not to say that business leaders should just dismiss the problem of externalities as unsolvable, or something to be solved on a distant day. Punting is the essence of short-termism.

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