Public Companies Should Reduce or Eliminate the Practice of Estimating Quarterly Earnings

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When it comes to this kind of insight and advice, I think I’ll go with these two guys………quarterly capitalism has to stop.

Short-Termism Is Harming the Economy
Public companies should reduce or eliminate the practice of estimating quarterly earnings.
By Jamie Dimon and Warren E. Buffett
WSJ: June 6, 2018

Every generation of Americans has a responsibility to leave behind a stronger, more prosperous society than the one it found. The nation’s greatest achievements have always derived from long-term investments. In both national policy and business, effective long-term strategy drives economic growth and job creation.

For public companies, these same principles are true. That’s why today, together with Business Roundtable, an association of nearly 200 chief executive officers from major U.S. companies, we are encouraging all public companies to consider moving away from providing quarterly earnings-per-share 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.

Because well-managed and well-governed businesses are the engine of the U.S. economy, good corporate governance is imperative. Though publicly owned companies account for only about 4,300 of America’s 28 million businesses, they are responsible for a third of all private-sector employment and half of all business capital spending. America’s public companies drive job creation, opportunity and economic growth.

This announcement today builds on the Commonsense Corporate Governance Principlesthat business leaders developed in 2016. These principles acknowledge that the financial markets have become too focused on the short term. Quarterly earnings-per-share guidance is a major driver of this trend and contributes to a shift away from long-term investments. Companies frequently hold back on technology spending, hiring, and research and development to meet quarterly earnings forecasts that may be affected by factors outside the company’s control, such as commodity-price fluctuations, stock-market volatility and even the weather. Read More

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