Buffett Says Health Venture CEO Pick to Be Disclosed in Weeks

10 June, 2018, 13:13 | Author: Kara Nash
  • Jamie Dimon, Warren Buffett urge CEOs to end quarterly earnings forecasts

Buffett, who is chairman of Berkshire Hathaway Inc (BRKa.N), and Dimon wrote in a Wall Street Journal column on Thursday that the pressure to meet short-term estimates has contributed to a fall in the number of US public companies.

Business Roundtable said it supports companies moving away from offering quarterly guidance and focusing on long-term goals.

Many CEOs who take part in the common practice of providing Wall Street estimates of how much money their companies will make often feel "pressure" to meet those quarterly forecasts.

Dimon, is chairman of the Business Roundtable, an association of almost 200 CEOs that is also backing the push to eliminate so-called short-termism.

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.

It's "sending the wrong message", Buffett told CNBC's Becky Quick in the interview.


"The three of us and the new CEO, we've basically reached agreement", Berkshire Chief Executive Officer Warren Buffett said Thursday in an interview with CNBC, without naming the individual.

But McKinsey & Co. found in a 2006 study that quarterly guidance didn't affect valuation multiples and didn't reduce share price volatility. Missing "the number" can often result in big, short-term stock moves.

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

"I have seen managements. get tempted by the predictions that they've made", Buffett said.

Proponents of the practice say it improves communications with investors and ultimately results in fewer, not more, wild swings in stock prices.

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.

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