Managing investors.

Managers and academics often lament that Wall Street's shortterm focus makes it impossible for corporations to plan for the long run. Palmisano disagrees. Yes, there are some on Wall Street, such as the sell-side analysts who dominate quarterly earnings conference calls, who can't see more than a few months out. But CEOs shouldn't participate in those calls anyway, he believes. They should instead focus their energies on the institutional investors who will embrace the long view if they are given ways to judge a company's progress. In this edited interview with one of HBR's executive editors, Palmisano describes how IBM's top management made significant changes to how the firm set goals and communicated them to investors. "The model," a rolling multi-year road map for earnings growth and cash generation, included an emphasis on R&D investment even during downturns, a plan for execution that involved every unit in the organization, and a shift toward long-term compensation. Transparency and open dialogues with large shareholders were also key. The CEO is a steward, Palmisano argues, charged with protecting a company and its returns for decades to come. But that vision need not clash with success on the visible horizon; during Palmisano's tenure, IBM's stock price soared.