How can companies’ required return on equity be reduced in OECD countries?

Companies’ required return on equity ( RoE ) is very high relative to long-term interest rates in OECD countries. It is likely that this abnormally high required return on capital is behind the many imbalances of contemporary capitalism: Skewing of income distribution against wage earners; Corporate concentration (especially in the United States); Intensive use of cheap fossil fuels; Offshoring to emerging countries; Increased debt leverage (share buybacks). This raises the question as to the economic policies that could reduce the required return on equity. Such policies might be : High taxes on excessive profits (beyond what finances investment and normal shareholder remuneration). Policymakers must be careful to not deter innovation; there will also be a need to be able to distinguish between rents and legitimate profits; Lengthening investors’ time horizon. Competition among investors for short-term performance is one of the drivers of the rise in the required return on capital.