SHORT-TERM AMERICA

A savvy, wide-ranging audit of the reasons American business is losing ground to Asian and European rivals, plus thoughtful prescriptions for retrieving the situation. Having recently spent two years as the US Treasury's director of corporate finance, Jacobs (now a Washington-based consultant) has an insider's sophisticated appreciation of the structural issues he addresses. Arguing that the commercial equivalent of instant gratification is a root cause of the nation's eroding competitiveness in global markets, the author identifies a number of problem areas—among others, disengaged investors, an adversarial system of corporate governance, high-cost capital, and shortsighted executive-compensation practices. Citing the enviable records compiled by major enterprises in Germany and Japan (where cross-ownership among affiliated companies, including depository institutions, creates a stable source of expansion/diversification funds as well as inducements to take a longer view), Jacobs offers a detailed package of reform proposals. He recommends, for instance, employing carrots and sticks to develop a new class of patient investors willing and able to work constructively with the concerns whose securities they hold. The author also counsels making corporate directors genuinely independent and hence more accountable to stockholders. Though he doubts Congress is up to the job, Jacobs would like to see a thoroughgoing overhaul of the US banking/financial system. Lastly, he urges managerial pay policies that reward long-term results, not tenure or expedients. Perceptive analyses of socioeconomic problems that require the immediate attention of the electorate—and of special interests that have failed to heed Benjamin Franklin's still timely warning: ``We must all hang together, or assuredly we shall all hang separately.''