Buffett And Dimon: No More Quarterly Profit Forecasts

Despite the short-term hit to results from the tax bill, chief executive Jamie Dimon hailed the measure as a boon for the USA economy."US companies will be more competitive globally, which will ultimately benefit all Americans", Dimon said in a news release.

In their op-ed piece, Buffett and Dimon argue that "effective long-term strategy drives economic growth and job creation" and that quarterly EPS guidance "often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability".

"It can 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", Dimon said.

The two men noted that companies often hesitate to spend on technology, hiring, and research and development in order to meet quarterly earnings guidance that can be impacted by seasonal factors beyond their control, such as political events and even weather. Around that time, big companies like Coca Cola, UPS and AT&T said they would no longer give quarterly guidance. That's not too surprising given the Dimon is now the chair of the Business Roundtable.

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.

Quarterly earnings guidance works like this.

On Thursday morning, the Business Roundtable which includes CEOs of USA companies with more than 16 million employees and more than $7 trillion in annual revenues, weighed in supporting the proposal.

Those in favor of guidance say it improves communications with Wall Street, reduces share price volatility and boosts a stock's value.

Buffett and Dimon said they were not opposed to the practice of quarterly and annual reporting that ensures transparency. CEO Jamie Dimon appealed for radical changes to the way public companies disclose financial information. Public companies owe it to all of them to get this right, they said.

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