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W W W. M A I N E B I Z . B I Z 25 J U N E 2 7 , 2 0 1 6 I N S I D E T H E N OT E B O O K "In addition to support for long-term thinking, the transparency of the LTSE will provide valuable data about how to nurture innovation in the real world. Something like the LTSE would accel- erate the creation of the next genera- tion of great companies, built from the ground up for continuous innovation." If the concept gets off the ground — and it has detractors, notably investors fearing they'll get the short end of the stick — it could take at least a decade to get going, Ries admitted. And the new exchange would need buy-in from both investors and companies. Ries already has a for-profi t com- pany behind the LTSE that has raised money from some powerhouse inves- tors including venture capitalist Marc Andreessen (Netscape cofounder), technology publisher Tim O'Reilly and the fi rst U.S. Chief Technology Offi cer Aneesh Chopra. Amy Butte, former CFO of the New York Stock Exchange, is an advisor to the project, according to the website Quartz. Quartz notes that technology start- ups already have tried to skirt market pressures on public companies. Google tried a Dutch auction to allocate some shares in its 2004 IPO. Facebook also tried to reduce control by investment banks when it went public in 2012. e LTSE would still require that listed companies satisfy all the normal SEC rules, but Ries said he'd try to use those powers of the exchange to create incentives for long-term thinking. at would include tenured shareholder voting, allowing shareholder votes to be weighted by the length of time they held the shares. ere also would be mandated ties between executive pay and long-term business performance by companies listed on the exchange. Ries also is proposing more disclosures so companies know who their long- term stockholders are and likewise for investors to know what investments the company is making. Like many ideas in Silicon Valley, it's a major shift from current thinking. But will it boost the number of IPOs and create a stronger environment for innovation? e proof is yet to come. Q uarterly earnings reports dog pub- lic companies, especially innova- tors, who feel pressured by answering to shareholders interested only in short- term fi nancial gains or high-frequency stock short-sellers. Some investors and technologists say the current fi nancial reporting processes for public com- panies stymie innovation and refocus creative thought onto the balance sheet, but also put a drag on initial public off erings: there were no tech IPOs in the fi rst quarter of this year. Not surprisingly, a Silicon Valley investor wants to change the sys- tem, and already is advocating with the U.S. Securities and Exchange Commission to create a new U.S. stock exchange called the Long-Term Stock Exchange that would give com- panies more breathing room to focus on longer-term ideas and products. e idea comes from Eric Ries, author of the " e Lean Startup," in the less-known epilogue of his 2011 book. Wrote Ries: "In addition to quarterly reports on profi ts and mar- gins, companies on the LTSE would report using innovation accounting on their internal entrepreneurship eff orts … they would report on the revenue they were generating from products that did not exist a few years earlier." He also said executive compensa- tion would be tied to the company's long-term performance. Trading on the new LTSE would carry much higher transaction costs and fees to minimize day trading and massive price swings, he wrote. e upside for LTSE companies is that they could structure their corporate governance to pursue long-term investments. Learn more at emeramaine.com/heatpumps We're Pumped About Heat Pumps! Save on energy costs relative to heating with oil, natural gas, and propane. Receive rebates on eligible units from Efficiency Maine. Reduced distribution rate during heating season for qualifying customers. Contractor of Choice for Northeastern Industrial and Energy Customers S K I L L , R E S P O N S I B I L I T Y & I N T E G R I T Y ( 2 0 7 ) 7 4 3 - 8 9 4 6 • BA N C R O F T C O N T R AC T I N G . C O M • S O U T H PA R I S , M A I N E Since 1977 L V , Mainebiz senior writer, can be reached at @ . and @ LV . Could a Long-Term Stock Exchange stimulate innovation? A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock A Long-Term Stock Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give Exchange would give companies more breathing room to focus on longer-term ideas and products.

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