Buffett, Dimon and Bezos have a CEO for their health care venture

Buffett, Dimon and Bezos have a CEO for their health care venture

The two executives said on CNBC Thursday that companies that focus on hitting their quarterly numbers may do things that hurt them in the future, such as delaying investments or changing when certain gains are recorded.

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

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.

FILE PHOTO: Jamie Dimon, CEO of JPMorgan Chase, takes part in a panel discussion about investing in Detroit during a panel discussion at the Kennedy School of Government at Harvard University in Cambridge, Massachusetts, U.S., April 11, 2018.


But McKinsey & Co. found in a 2006 study that quarterly guidance didn't affect valuation multiples and didn't reduce share price volatility. Heading into the profit reporting season, a CEO gives forecasts of sales and profits to the Wall Street analyst community. They offered "common-sense" recommendations for public companies to improve governance and relations with shareholders. In contrast, results that fall shy of market forecasts often cause the stock price to fall.

Dimon, in a joint interview with Buffett to CNBC, claimed that executives are often under pressure to make quarterly predictions, but the practice "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", report said.

Dimon said that Schultz "would be a great chief executive or governor or senator or mayor or whatever he wants to do", but added that he's not sure that managing a business makes a person suitable for politics.

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. "But it would be a step in the right direction", they wrote.

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