Buffett And Dimon: No More Quarterly Profit Forecasts
Jun 09 2018
Buffett and Dimon helped produce a set of voluntary governance guidelines two years ago, which was signed by more than one dozen executives. "We should have an announcement on that matter within maybe two weeks".
JPMorgan Chase CEO Jamie Dimon and billionaire investor Warren Buffett are calling on CEOs to move away from issuing quarterly profit "guidance" to Wall Street analysts, arguing that the financial markets' focus on short-term results harms the economy.
Earnings forecasts "can often put a company in a position where management, from the CEO down, feels obligated to deliver earnings and therefore may do things that they wouldn't otherwise have done", Dimon said Thursday in an interview with CNBC. "You're not going to be ordained to be the president of the United States. Business just doesn't work that way".
Companies often hold back spending on technology, hiring and research and development to meet quarterly earnings guidance that may be affected by factors outside the company's control, they wrote. "Let's not forget how we got here: Reg FD was meant to end selective disclosure, the private guidance on future results", Santoli said.
A short-term focus by top executives teaches others within a business to make their own short-term decisions that aren't in the best interests of the business, he said. Stock prices can go up or down based on whether a company exceeds or falls short of the prediction it has made three months earlier, often increasing the amount of trading in the company's stock. JPMorgan Chase reported lower fourth-quarter earnings January 12, 2018 on weak trading revenues and one-time costs from USA tax reform, partly offset by gains from higher interest rates.Net income for the quarter ending December 31 was $4.2 billion, down 37 percent from the year-ago period.
Amazon's size and reputation as a disruptor prompted investors to sell shares of companies that might be hurt by the venture when it was announced in January.
"Public companies should be managed for long-term prosperity, not to meet the latest forecast".