Buffett, Dimon say quarterly profit forecasts harming economy

09 June, 2018, 20:41 | Author: Elaine Woods
  • Bitcoin Surprise Surprise! Jamie Dimon and Warren Buffet Still Don’t like Bitcoin Rick D

The three business icons announced in January they would partner to tackle rising health-care costs. They plan to name the venture's first CEO publicly within two weeks.

Warren Buffett has joined forces with Chairman and CEO of J P Morgan Chase Jamie Dimon to convince chief executive officers to end the practice of quarterly profit forecasts, reported CNBC. That's not too surprising given the Dimon is now the chair of the Business Roundtable.

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.

"In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", they wrote. "Their ego gets involved". "You hurt your allies more than anyone else, people tend to retaliate and you can incite nationalism in countries because it's not the same thing as if you and I were negotiating and being tough on each other... it can create these potentially negative outcomes".

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.

Dimon , the chairman of the Business Roundtable, said the group of CEOs has thrown its support behind companies backing away from the practice.

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"Sometimes you're a cork in the ocean", he said.

Wall Street traders seek the quarterly predictions as benchmarks of a company's performance.

Such managers argue that the forecasts are important disclosures by companies and inform investors about what the business leaders expect to accomplish.

Dimon has blasted excessive reporting requirements and the short-term focus of quarterly earnings. The information is meant to let investors and potential investors decide whether to buy or sell a company's stock.

"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", he said.

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