End Short Term ism / SARBANES OXY-MORON
Wall Street should cut some slack!
Today Warren Buffet and Jamie Dimon called for the end of short term-ism. Encouraging publicly traded company CEOs to move away from setting quarterly forecasted guidance and public targets. This takes me back to an article I wrote more than 15 years ago.
Webster defines Oxymoron as a rhetorical figure of speech in which incongruous or contradictory terms are combined, as in a deafening silence and a mournful optimist.
When last I looked, Senator Sarbanes and Congressman Oxley instituted the most significant reform in the securities law since the SEC was enacted. The intention of this act was to restore confidence in financial reporting. It was decreed to represent a new paradigm for corporate responsibility, accountability, transparency and behavior.
Has anyone sent the guys on Wall Street a copy of this legislation for their review? Their tactics of punishing Corporate America at a frenzied pace is surely having a negative effect on restoring this investor’s confidence in corporate financial reporting.
Think about this: miss earnings by one penny and your company can loose several billion dollars in market cap overnight! This has been the case at various times with Dell, Ford Motor, Motorola, Hershey and Walgreens to name a few.
Hey Wall Street, do you think you might be promoting the use of creative means to find that extra penny before reporting next time? I would believe it takes a very honest company to report a one cent decrease relative to estimates.
How about growing revenue year-on-year by better than 20% but missing analyst expectations by 1% and watching your stock price devalue by double digit percentages overnight. This was the unfortunate recent experience of Ciena Technology Corporation. The company had reported “positive sentiment after strong results for the fourth quarter” and forecasted a 20% revenue growth for next fiscal. Analysts surveyed by Thomson Financial had estimated, on average, revenue growth of 21%.
Hey Wall Street, do you think you are promoting the use of creative tools to increase sales by 1% before reporting next time?
Somebody should tell these 30 some things with their Wharton MBAs that Corporate America doesn’t need another excuse to cheat. They are creating a breeding ground for corporate irresponsibility, creative accounting, a lack of transparency and overall bad reporting behavior.
Having been there, I know that most of these guys never leave their cubicles. Yet, they predict company EPS within a penny or projected revenue growth within a single percentage point or less without any inside perspective into the company. Wow -- now that is magical!
Hey Wall Street, how about doing market investors a favor?
Stop pumping more volatility into the markets. Help us all to redefine what it means to put two more cents in.
No pressure – it’s only the stability of our economy’s future that is in your hands.