Buffett Says Health Venture CEO Pick to Be Disclosed in Weeks

10 Junio, 2018, 00:44 | Author: Earnest Bishop
  • Bad Advice       Quarterly guidance has resulted in bigger earnings surprises since 2016              Source Bloomberg

The pressure to meet short-term estimates has contributed to a fall in the number of USA public companies, wrote Buffett, chairman of Berkshire Hathaway Inc (BRKa.N), and Dimon, who is also the chairman of top executives' lobbying group Business Roundtable, in an article on Wednesday.

Hedge fund Elliott Management Corp Chief Executive Paul Singer said on Thursday he agreed with billionaire investor Warren Buffett and JPMorgan Chase & Co (JPM.N) CEO Jamie Dimon that companies should move away from providing quarterly earnings guidance.

Many CEOs who take part in the common practice of providing Wall Street estimates of how much money their companies will make often feel "pressure" to meet those quarterly forecasts.

Dimon said companies might forego investments they should make in their business, such as marketing, hiring or research, in order to hit short-term goals.

Several big companies like AT&T, Coca Cola, Facebook and UPS have stopped issuing quarterly earnings guidance.

Dimon, is chairman of the Business Roundtable, an association of almost 200 CEOs that is also backing the push to eliminate so-called short-termism.

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Securities laws require quarterly reports on profits, revenue and other information but do not require quarterly forecasts.

"Reducing or even eliminating quarterly earnings guidance won't, by itself, eliminate all short-term performance pressures that US public companies now face, but it would be a step in the right direction", Dimon and Buffett wrote. Public companies owe it to all of them to get this right, they said. "Such short-termism is unhealthy for America's public companies and financial markets - which are critical to economic growth and financial prosperity", Business Roundtable said in a statement.

Quarterly earnings guidance works like this.

Proponents of the practice say it improves communications with investors and ultimately results in fewer, not more, wild swings in stock prices.

Both men said they still want companies to release detailed quarterly and annual financial data, so investors can evaluate them.

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