The head of research for SG Cowen, Barry Tarasoff, has an idea: Prohibit companies from giving short-term earnings guidance. In Mr. Tarasoff’s view, this is the only way to eliminate the newest source of angst among corporate critics – “short-termism.” He may be right.

In an era of sound bites, instant messaging, and – oh, yes – hedge fund ascendance, is it any wonder that managers are managing for the short term? Concern about so-called short-termism is on the rise, with the Conference Board, pension managers, and even Warren Buffett on the prowl for remedies.

Last week’s move by Coca-Cola to restructure board compensation to reward long-term performance was applauded by Mr. Buffett. The change ties board pay to three-year objectives, and puts board members at risk of receiving no compensation if earnings per share fall behind a certain growth target. Though the concept is appealing, the reality is that even over a three-year period, the board arguably has little impact on earnings. Activities outside the board’s influence could well mean that its members receive no compensation, and could therefore discourage some from participating.

Nonetheless, it was a bold move in a world normally starved of originality, and it highlights the increasing frustration of investors and managers. Make no mistake: Corporate managers are as annoyed by the focus on short-term performance as any outside audience.Imagine for a moment the man-hours lost to assessing quarterly earnings, smoothing quarterly earnings, and then discussing quarterly earnings. It is a horror!

Is there a bigger cost? There is wide consensus that managing for the short term means that corporations leave investment and growth opportunities on the table. Would General Motors be in its current fix today if, in the 1970s, it had aggressively attempted to fend off Japanese competitors by investing in modernized manufacturing facilities rather than hewing to short-term earnings goals? Who knows, but devotion to meeting quarterly expectations means some costs are deferred and some opportunities forgone.

In a National Bureau of Economic Research survey of 401 financial executives, 78% said they would forgo an attractive investment opportunity if that expenditure would stand in the way of realizing smooth quarterly earnings.

In an effort to combat short-termism, the Conference Board is attempting to marshal the influence and energy of three distinct groups – corporations, investors, and financial analysts. The director of the Global Governance Research Center for that body, Carolyn Kay Brancato, says the issue has taken on new urgency.

Among the factors focusing investors and corporations on the issue are the overhaul of corporate governance practices, heightened shareholder oversight, renewed efforts to create ideal incentives for managements, frustration over the narrowness of sell-side research,and, finally, the growing conviction among some that nonfinancial measures of achievement should be recognized.

Ms. Brancato says, for example, that several studies have shown that companies that observe best environmental practices perform better over time. Others cite measurements of intangibles such as customer satisfaction or effective research and development as valuable in determining a company’s performance.

Ms. Brancato is also a realist and recognizes that refocusing managements away from the quarterly earnings release may be akin to effecting a sharp U-turn from the Queen Mary. Managements today are held accountable most publicly by Wall Street analysts who gear their recommendations to shortterm results. A CEO who misses an earnings target is consigned to the market doghouse until he can prove himself three months later. The analyst that puts his favorite hedge fund clients in a stock that plunges on a bad earnings report may find himself looking for work.

“It is a chain,” Ms. Brancato says. “We have to break all the links at the same time. Pension funds have to say to managers,’We will value you on longerterm performance.'” Also, she says, “Companies have to take control over how to give guidance.”

A group in Britain called the Enhanced Analytics Initiative has taken up the crusade.This is a group of pension managers that has tried to establish an incentive for sell-side analysts to provide long-term research. Raj Thamotheram, a senior adviser with the Responsible Investment for Universities Superannuation Scheme – a group that invests teacher pension money in Britain and which is analogous to TIAA-CREF in this country – says the group has offered to set aside 5% or more of each institution’s commissions specifically to reward those firms considered to be looking at long-term prospects.

Mr. Thamotheram says, “Our investment culture rewards and encourages company managements to operate in a sub-optimal manner.” Describing much of Wall Street research, he says, “If clients are stupid and pay for the wrong thing, they will get it.”

It has taken EAI 18 months to attract a North American participant; only recently have the Retirement Fund of Canada and Calvert Funds in this country become part of the consortium. While a poll shows that most investment professionals think nonfinancial measures such as R&D effectiveness or environmental best practices will become mainstream in the next decade, no managers in America believe this to be so.

Mr. Thamotheram may be secretly tickled that European investors are ahead on this issue. It may be the greater influence of hedge funds in America or the greater role played by shareholder activists that accounts for the difference. After all, what CEO wants to take the chance that a faltering stock price invites the meddling of a corporate raiser? Just ask Richard Parsons.

Overall, he explains, “We are trying to liberate the creative intelligence of the best analysts while raising the standards of the others.” Is it working? Mr. Thamotheram says it is. “The number of research reports that qualify under our guidelines has increased four times,while the number of brokers submitting reports is up threefold over the past 18 months.”

Though such a program should be applauded, there is clearly a long way to go. The president of the International Center for Corporate Accountability at Baruch College, Prakash Sethi, is skeptical. “Different shareholders have different agendas,” Mr. Sethi says. He also maintains that “big companies, like the oil companies, do invest billions of dollars that won’t see any short-term return; otherwise, you wouldn’t have a short term. No midsize company can work for the short term.

“There is a misconception; firms don’t invest for the short term. But some do postpone expenses and so on to smooth earnings. It isn’t fraud.”

Will the focus change? Not according to Mr. Sethi. The competing objectives of different shareholder groups make cohesive action nearly impossible. He maintains that the only class of shareholder who is truly interested in the long term is the pension manager.

As for management? Mr. Sethi cites a study showing that the average tenure for the CEO is three to five years. That’s hardly long enough to get started on the long term.