Would eliminating quarterly guidance improve a company’s reputation?

The Financial Times reported that the Business Roundtable Institute for Corporate Ethics, which includes companies like Intel, Motorola and Pfizer, is calling for an end to quarterly guidance.   Such a move would, if it happened (I’m placing no bets, yet), lead to a positive reputation impact as companies shift their executive operations and communications from a short to a long term focus.

  • Avoid the risk of being seen as managing earnings – a view that almost by definition means companies are not being 100% honest in the numbers they provide.
  • Eliminate short term focus reputations – companies seen as obsessed with quarterly earnings may please some analysts but companies can develop a reputation for having a short term focus at the expense of the long term view and health of the business. 
  • Allow top management to spend more time managing and communicating around the business itself instead of needing to spend so much time communicating with Wall Street around quarterly earnings.
  • Allow business media (especially daily media) to shift more focus to the long term investments, business moves and strategies of companies as the ink dealing with quarterly estimates and earnings would probably be reduced.

I remember a number of years ago when Gillette and then a few other big companies announced similar moves.  A number of people applauded, a number of people thought it was an excuse to avoid bad news, and, in the end, few companies seemed to follow. 

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