Warren Buffet and Jamie Diamond Team Up to Convince CEOs to End Quarterly Earnings Forecasts

via CNBC:

  • Jamie Dimon, the chairman of the Business Roundtable, said the group of CEOs has thrown its support behind companies backing away from the practice.
  • “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.
  • Quarterly earnings guidance sets up executives to focus on the short-term and act in ways they might not have acted otherwise, critics of the practice say.

Warren Buffett and Jamie Dimon have teamed up to once again call for the end to quarterly earnings guidance by companies.

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

Executives often feel pressure to make quarterly forecasts, but “it 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 in a rare joint interview with Buffett airing Thursday on CNBC’s Squawk Box.

Dimon, the chairman and CEO of J. P. Morgan Chase, and Buffett, chairman and CEO of Berkshire Hathaway, wrote about the group’s endorsement in an opinion column in The Wall Street Journal.

It is a long-simmering debate but one that has gotten more attention in an era when activist investors are more vocal about pushing companies to deliver on their promises.

 

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