A recent report by the Aspen Institute [PDF] suggests a big part of the problem with corporations' focus on the short term is shareholders themselves. Today's shareholders are relentless in demanding that executives "maximize shareholder value." Shareholder value, in turn, is typically measure by share price — meaning share price today, not share price next week or next decade. This narrow focus on raising stock price by any means possible keeps companies from making long-term investments, protecting the interests of essential stakeholders like employees or customers, or taking much account of social welfare and ethical considerations in making business decisions.
For CEOs, recognizing that shareholders are part of the problem also means realizing that shareholders can be part of the solution. There are at least three useful ways to begin. The first is to educate shareholders by providing them with better information about their own long-term interests. The second is to practice what Warren Buffett calls "shareholder eugenics." The third is to make sure that executives aren't compensated in ways that make them too sensitive to short-term shareholders' demands.
Education. Most shareholders are mom-and-pop investors who hold shares either directly or through pension and mutual funds. They are saving for the long term, to retire, or to pay a child's college education. They are diversified, which means they don't benefit from a mergers-and-acquisitions merry-go-round where targets get premiums that bidders must pay (diversified "universal investors" may own shares in both bidder and target.) And they are human beings who care about the quality of the air they breathe and the ecological health of the planet they leave for future generations.