The debate over whether corporations should provide quarterly earnings guidance is not a new one. Recently, however, financial heavyweights Warren Buffett and Jamie Dimon (and even the Trump Administration) have resurfaced this topic for discussion: Do quarterly forecasts drive short-termist behavior at today’s companies?
In this episode, regular guest host Doug Chia, Executive Director of The Conference Board Governance Center, sits down with Chuck Nathan, Senior Advisor at Finsbury, to explore both sides of the argument:
Let’s say the 200 biggest or best companies [give up quarterly earnings]. Other companies will [then] seek to take advantage of that event to distinguish themselves as being ‘more investor friendly’, ‘more willing to talk to investors’, and ‘more willing to provide information’…I think it’s the same thing on the investor side. If some investors would give it up, others would seek a competitive advantage by not giving it up.
Nathan explains why, despite the influence of the Business Roundtable, he doesn’t foresee today’s companies and CEOs eradicating quarterly earnings on their own.
“So much of our entire [investing] ecosystem is built on the stock market as a measuring rod for how companies are doing,” Nathan emphasized. “It’s pretty hard for that to go away or to say, ‘We’re going to have long windows where people are operating in the dark.’”