Corporate America's top dog blasts forecasts

US Chamber of Commerce president Tom Donohue told a crowd of Wall Street analysts yesterday that the time has come for public companies, the analysts who track them and investors to take a longer view of business. "I want to start a stampede away from quarterly earnings guidance altogether," Donohue said at the Wall Street analyst forum in New York. "There is something fundamentally out of balance when short-term considerations become so dominant, and so ingrained - not only on Wall Street but in Corporate America - that the long-term view is lost." Donohue complained that a culture of "immediate financial gratification" has infected financial markets, fed by an explosion of media outlets, including Internet bloggers and cable news channels, offering instant reaction to every event. "We've created an environment where a company's long-term value and health are all too easily sacrificed at the altar of meaningless short-term performance," he said. "We focus on a company's numbers and ignore its business - and that philosophy poses a significant threat to our future competitiveness."

While US chief executive officers fret about the next three months, their competitors in China and India are busily laying the foundation for the next decade, he complained. Among the consequences of Wall Street's obsession with instant gratification, according to Donohue, was the US Congress's "hasty" legislative response to the corporate scandals of 2002, a flight of investment to private companies and a proliferation of class-action lawsuits. "The mere filing of a class-action securities lawsuit results, on average, in an immediate 3.5% drop in a defendant company's stock price," he said. Donohue said he's giving voice to growing private frustration among many ceos.
(Globe and Mail 051201)

Finally, some rational thought! The politicians should take this seriously too - instead of thinking only two or four years into the future, and only for their personal or partisan gain - they should be planning and implementing for the long term as well.