Why corporate lifespans are shrinking - Sir John Kay

The rise and fall of GE

The case of General Electric shows how the pursuit of shareholder value can shorten, rather than extend, a company’s life. After the Second World War, GE moved far beyond its electrical roots. It dominated the US lightbulb market to the point of antitrust action, and by the 1960s, its portfolio ranged from consumer appliances to computers, nuclear reactors, and jet engines.

Under Jack Welch, who led the group from 1981 to 2001, GE expanded again. He built GE Capital into a vast financial arm alongside industrial businesses. The strategy made GE the world’s most valuable listed company in the late 1990s, but it also created vulnerabilities.

When the 2008 financial crisis hit, GE Capital was exposed, and Welch’s successor, Jeffrey Immelt, spent years trying to reduce dependence on it.

Today, the company has been pared back to power, energy, and aviation; a sharp contrast with the sprawling conglomerate that once stood as a symbol of US industrial might.

The lesson is that reliance on financial maneuvers can flatter results for a time, but without sustained investment in competencies, firms are more exposed when shocks arrive.

Management as a profession

The focus on shareholder value creation has encouraged executives to seek easy financial returns, rather than build capabilities that sustain businesses. The paradox matters not only for executives, but for investors who prize stability, employees who depend on resilient firms, and whole economies that rely on enduring institutions.

Quarterly reporting, in particular, is often blamed for short-termism. But I think the deeper issue is culture. For much of the 20th century, large companies were run by managers who increasingly saw themselves as professionals, with an ethos of stewardship and responsibility.

From the 1970s, that ethos weakened as shareholder primacy and financialization took hold. Today, the language of “leadership” dominates, presenting the CEO as a heroic individual whose strategic vision can and must refocus the company.

Business success relies on the creation, commitment, and capabilities of high-performing and adaptive teams. The reassertion of management as a profession is, in my view, essential if companies are to endure.

Longevity without stagnation

Corporate longevity should not be confused with corporate stagnation, however. Companies must adapt to survive. IBM shows what happens when a company misses successive industry shifts. It stumbled as personal computers displaced its mainframes in the 1990s, and though it recovered by moving into services, the emphasis soon tilted toward hitting earnings-per-share targets.

That meant cutting expenses and holding back investment. IBM then moved too slowly into cloud computing, and years of flat R&D spending left it struggling to catch up. Its shares peaked in 2013 and never regained momentum; a reminder that short-term financial tactics cannot replace long-term innovation.

How to reverse the trend

Reversing the slide towards shorter corporate lifespans requires practical changes. Business should:

Rebalance incentives.Reward long-term performance rather than short-term share price movements.

Reinforce management as a profession. Emphasize stewardship and accountability, not just personal leadership.

Reinvest in people and innovation. Training, plus research and development, provides the foundations of resilience.

Avoid financial engineering. Share buybacks and debt-funded deals cannot substitute for genuine strategy.

Shift the corporate narrative. Stop talking about “maximizing shareholder value” and start talking about “building great businesses.”

These steps are not radical. They draw on traditions that once underpinned corporate longevity. What has been lost is not the knowledge of how to build enduring firms, but the will to resist financial pressures and restore balance.