Buffett, Dimon say quarterly profit forecasts harming economy

Roman Schwartz
June 9, 2018

"When companies get where they're sort of living by so-called 'making the numbers, ' they do a lot of things that really are counter to the long-term interests of the business", Buffett said.

Berkshire Hathaway CEO Warren Buffett and JPMorgan CEO Jamie Dimon cowrote an op-ed article published Wednesday by The Wall Street Journal.

"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.

The two men are among the financial industry's most powerful leaders.

In the latest appeal, they said companies often hesitate to spend on technology, hiring, and research and development to meet quarterly earnings forecasts that can be affected by seasonal factors beyond their control.

They told companies to move away from providing quarterly guidance.

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Buffett and Dimon started down this path in 2016 with a document called Commonsense Corporate Governance Principles that included recommendations for "truly" independent corporate boards of directors and "constructive engagement" between corporate management and shareholders, as well as eliminating quarterly EPS guidance.

Buffett and Dimon also blamed the practice for contributing to the decline in the number of public companies in the US over the past 20 years.

Short-term-oriented capital markets have discouraged companies with a longer-term view from going public at all, depriving the economy of innovation and opportunity, the two said.

Although we've seen no immediate opposition to the proposed elimination of quarterly EPS guidance, it's not hard to imagine what at least one argument might be: just because companies don't publish the number does not mean they won't calculate such a number.

JPMorgan CEO Jamie Dimon, who has made negative comments about the cryptocurrency in the past, said during an interview Thursday with CNBC that while he doesn't want to be a "bitcoin spokesperson", buyers should "beware".

Dimon said Thursday that about 20 percent of Business Roundtable members still do quarterly guidance and about 60 percent provide annual targets.

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