In this installment of Organizational Performance, we draw attention to two types of shareholders that tend to push executive decision-making in different directions. Quality shareholders (QSs) invest in a small number of companies and hold their shares over time. QSs offer patient capital that allows executives to focus on building and sustaining competitive advantages. Transient institutional investors (TIIs) hold dispersed shareholdings across a wide array of companies and frequently trade in and out of any given stock. TIIs impose pressure on quarterly earnings reports that induce managerial myopia and inhibit strategic thinking. We consider the influence of these investors on how many consumers are harmed before a defective product is pulled from the market. The good news is that for every 1% increase in QS shareholding, prerecall consumer harm decreases by 2%. Unfortunately, for the same amount of increase in TII shareholding, prerecall consumer harm increases by 6%-a frightening prospect. The case of product recalls draws the difference between QSs and TIIs into stark contrast. In response, we offer practical recommendations to assist managers in navigating these two types of powerful institutional investors.

Today's corporate environment requires managers to be excellent decision makers. Their ability to make fast, widely-supported, and effective decisions will, in large part, shape the performance of their firms. In this article, we describe two cognitive systems that influence decision making. System 1 refers to a process that is fast, effortless, and intuitive. System 2 is a slow, controlled, and rule-governed decision-making process. Both are important to a wide variety of managerial decisions, and they interact with each other. There are, however, a number of forces at work that hinder the effectiveness of these processes. For example, we know from prospect theory that managers are unwilling to incur loss, so much so that they often make irrational decisions based on a small probability that they could avoid such loss. Another example, the escalation of commitment, explains why managers may continue to dedicate resources to failed projects. We describe these and other biases, with a view toward helping managers better understand the problems of decision making and improve the effectiveness of their decisions.