Jamie Dimon and Warren Buffett have urged public companies to steer clear of the practice of providing quarterly EPS guidance, saying it hampers long-term investments.
"In our experience, quarterly earnings guidance often leads to an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability," Dimon and Buffett wrote in an opinion piece in The Wall Street Journal.
Dimon, Chairman and CEO at JPMorgan Chase & Co., is the chairman of Business Roundtable, an association of CEOs of leading U.S. companies who are also backing the idea of ending quarterly EPS outlook. Buffett is chairman, president and CEO at Berkshire Hathaway Inc.
In a bid to meet the quarterly earnings projections, companies tend to rein in technology spending, hiring, and research and development, they said, adding that the pressure to meet short-term earnings estimates has caused the number of public companies in America to drop in the last 20 years. Besides, the short-term focus has also discouraged companies with a longer-term view from going public.
Dimon and Buffett said their views about quarterly EPS should not be misinterpreted as an opposition to quarterly and annual reporting that ensures transparency. The two executives were among the group of CEOs that helped create a set of corporate governance guidelines in 2016.
