Buffett, Dimon say quarterly profit forecasts harming economy

Buffett, Dimon say quarterly profit forecasts harming economy

J.P. Morgan chief executive Jamie Dimon appeared on CNBC on Thursday to discuss why he doesn't think tariffs are the way to go.

The pressure to meet short-term estimates has contributed to a fall in the number of United States public companies, wrote Buffett, the chairman of Berkshire Hathaway, and Dimon, who is also the chairman of top executives' lobbying group Business Roundtable, in a Wall Street Journal article on Wednesday.

Companies often hold back spending on technology, hiring, and research and development to meet quarterly earnings guidance that may be affected by factors outside the company's control, the business leaders wrote.

"Reducing or even eliminating quarterly earnings guidance won't, by itself, eliminate all short-term performance pressures that USA public companies now face, but it would be a step in the right direction", Dimon and Buffett wrote.

"We have an outstanding individual", Dimon said.

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. In the past, Buffett has said that he could record some of Berkshire's unrealized investment gains at nearly any time if he wanted to make a quarter or year look good, but that wouldn't help the company succeed in the long run.

"Quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability", they said. "We're hoping a bunch of companies drop it right away".

So they should stop the forecasting, the two men said.

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.

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

There has been great interest in these companies' health initiative since it was announced early this year, but few details have been released so far.

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