The wrong focus? How the race to meet targets can throw corporate America off course
It is one of the rituals of American capitalism. Every three months, companies, investors and analysts eagerly await the word from the corporate version of the ancient oracles: the chief executive.
Like their Greek and Roman predecessors, these corporate titans are charged with predicting the future: no number is more eagerly awaited by Wall Street than "earnings guidance" - companies' own performance forecast. Setting a recurring target for profit growth was intended to make companies more accountable to the market and focus management minds on achieving tangible results for shareholders. But in recent months, that part of the ritual appears to be losing its appeal.
Long-standing critics such as the veteran investor Warren Buffett have been joined by academics, politicians, regulators and, increasingly, chief executives and analysts in attacking a practice that forces companies to focus on narrow, short-term goals.
Some companies have already acted. Pfizer, Motorola, Intel, Ford, General Motors, McDonald's, Coca-Cola and The Washington Post - the last two part of Mr Buffett's portfolio - have stopped feeding analysts quarterly predictions. Google, a high-profile newcomer, has dared to incur the wrath of Wall Street by refusing àny guidance at all.
According to the National Investor Relations Institute, just over half of US-listed companies offer earnings guidance every quarter, down from 75 per cent three years ago.
The question facing corporate America and its various stakeholders, however, is whether more and more companies will reject earnings guidance,fundamentally changing the relationship between Main Street and Wall Street - and bringing the US into line with the rest of the world.
In the UK and continental Europe quarterly earnings guidance has not caught on, mainly because financial reporting tends to take place every six months. Also, in a marked difference from the US, regulators on the other side of the Atlantic have ???-traditionally opposed com???--panies predicting their own ???-performance.
The American anti-guidance camp argues that scrapping the practice could change for the better the way companies run themselves and lengthen the investment horizon of fund managers.
That, in turn, would alter the dynamics of the financial research industry, currently dominated by the short-term needs of fast-trading, big-paying hedge funds.
Supporters of earnings guidance, however, warn that depriving companies of the ability to communicate their earnings potential would hit smaller businesses and high-technology industries, whose funding rests on repeated contacts with the market and investors.
Yet the growing number of opponents to quarterly guidance warn that obsessive attention to short-term value compromises long-term profit growth.
Some even argue that being forced to hit quarterly targets may drive companies to take dubious short-cuts - what Mr Buffett, well before the latest wave of corporate scandals, dubbed "operating acrobatics" and "accounting games" .
Indeed, many corporate governance experts believe that managers at companies such as Enron and WorldCom were tempted into crossing the line of legality partly out of a desperation to meet Wall Street's exceedingly optimistic expectations.
Today a report by the Business Roundtable Institute for Corporate Ethics, an offshoot of the powerful organisation that groups 160 chief executives of some of the largest US companies and the CFA Institute, the analysts' trade body, will add the influential voices of big business and investment professionals to the chorus of those clamouring for the end of quarterly guidance. "The obsession with short-term performance does not create value for shareholders and in many cases destroys value," says Dean Krehmeyer, executive director of the Business Round???-table Institute for Corporate Ethics, and one of the report's authors.
When guidance became popular in the 1990s - largely because of legal changes allowing companies to make forward-looking statements and shareholder demands for greater transparency - it was praised for its ability to boil down a company's prospects to a simple earnings per share number or range.
Nearly two decades later, chief executives protest that a company's essence cannot be captured, nor the vagaries of the business cycle acknowledged, in a single dollars and cents figure.
"No company is going to grow at exactly x per cent quarter after quarter," says Steve Odland, chairman and chief executive of the retailer Office Depot. "Life just isn't like that."
Setting a company's expected growth in stone puts pressure on management to "make the numbers", irrespective of the long-term interest of shareholders.
More than 80 per cent of some 400 executives questioned by the academics John Graham, Campbell R. Harvey and Shivaram Rajgopal admitted they would reduce spending in important areas such as research and development, maintenance and hiring in order to meet earnings targets. More than half said they would delay new projects even if it meant sacrificing long-term value.
Corporate experts argue that this imperative to satisfy the marketeach quarter leaves companies' top management torn between two contrasting courses of action. "Companies are forced to ask themselves: do I manage to meet that [earnings] number or do I do what is best for the long-term interest of the business?" says Tim Koller, a partner at the management consultants McKinsey. In private, many chief executives acknowledge the negative effects of earnings guidance but say that, were they to abandon it, the share price would suffer.
Analysts and fund managers admit guidance makes their forecasting easier and avoids the embarrassment of overly optimistic or pessimistic predictions.
Yet there is evidence that both groups would be prepared to live without guidance if companies made the first move. More than three-quarters of the 80,000-plus investment professionals who are members of the CFA Institute said they wanted companies to move away from quarterly guidance and would prefer more information on their long-term plans.
"Most investors want to talk about the business as opposed to asking management whether they are going to make it by a cent," says Jeffrey Diermeier, a former chief investment officer at UBS Global Asset Management and head of the CFA Institute.
Despite that, chief executives argue that guidance can help reduce share price volatility and boost valuations. "There is a perception that public companies need quarterly earnings guidance as part of their marketing process," says Kurt Schacht, managing director of the CFA Centre for Financial Market Integration.
Indeed, companies such as General Electric have built a reputation and a considerable market capitalisation on consistency in meeting their own demanding EPS growth targets.
In February, when Google shares fell sharply after it unveiled results below market expectations, observers blamed the company's failure to manage Wall Street's forecasts.
Nevertheless, there is little empirical evidence that offering guidance benefits the share price. When McKinsey examined 4,000 companies with revenues of more than $500m (�394m, ￡269m) it found "no evidence that [guidance] affects valuation multiples, improves shareholder returns or reduces share price volatility". In fact, many hedge funds make no secret of the fact that they make large profits by "shorting" companies whose announced earnings fall shy of their guidance.
"Earnings guidance causes more problems than it solves," says Rob Markey, a partner at the management consultants Bain & Company. "By giving guidance, the management team increase the level of disappointment and anxiety when un???-expected events invariably occur."
Although corporate America's disenchantment with earnings guidance is undeniable, there are powerful obstacles to change.
For a start the salaries, and even the jobs, of both analysts and fund managers are heavily dependent on quarterly performance. And with trading volumes rising sharply in recent years, the average time investors hold a stock is down to a mere nine and half months, heightening the market's need for rapidly delivered information on the short-term outlook.
"The dilemma is [that] we as the American investing public have a short investment horizon," says John Castellani, president of the Business Roundtable. The same is true for America's business leaders. With the typical chief executive of a large US company expected to last no more than five years, few can be expected to set their sights on the long term.
Some politicians and activists believe attitudes could be changed by tax laws that penalise investors who trade in and out of stocks. But given regulators' limited say on issues such as earnings guidance and investment decisions, legislative fiat would be unlikely to curb the focus on the short term.
In the words of Louis Thompson, chief executive of the National Investor Relations Institute: "If you want to get away from the short-termism chains you have to break all the links."
“业绩指引”引出麻烦
这
是美国资本主义的惯例之一。每三个月，公司、投资者和分析师都会急切地等待古代圣贤在公司中的化身――首席执行官来发布消息。
就像他们的希腊和罗马先辈一样，这些公司中的巨人担负着预测未来的责任：华尔街最迫切知道的数字莫过于“业绩指引”，即公司自己的业绩预测。为利润增长设定一个经常性目标，目的是使公司对市场更加负责，同时将管理层的注意力集中在为股东赢得切实的业绩上。但最近几个月，这一惯例似乎正失去吸引力。
长期以来，资深投资家沃伦?巴菲特(Warren Buffett)等人一直在批评这一强迫公司关注狭隘、短期目标的做法。现在，学者、政界人士、监管者，以及越来越多的首席执行官和分析师也加入了他们的阵营。
一些公司已开始行动起来。花旗集团(Citigroup)、辉瑞制药(Pfizer)、摩托罗拉(Motorola)、英特尔(Intel)、福特(Ford)、通用汽车(General Motors)、麦当劳(McDonald’s)、可口可乐(Coca-Cola)、《华盛顿邮报》(The Washington Post)，已停止向分析师发布季度预测，其中可口可乐和《华盛顿邮报》是巴菲特投资组合中的股票。而高调的新来者谷歌(Google)则拒绝提供任何业绩指引，丝毫不怕引起华尔街的愤怒。
全美投资者关系协会(National Investor Relations Institute)称，目前仅有略高于半数的美国上市公司提供季度业绩指引，与三年前的75%相比大幅下降。
但美国公司及其各种利益相关方所面临的问题是，是否会有越来越多的公司拒绝提供业绩指引，从而从根本上改变普通老百姓与华尔街金融界之间的关系，并使美国与世界其它地区保持一致。
在英国和欧洲大陆，季度业绩指引并没有流行开来，主要原因是财务报告通常每六个月公布一次。此外，与美国截然不同的是，大西洋彼岸的监管者们历来反对公司预测自己的业绩。
帮凶嫌疑
美国“反业绩指引”阵营认为，废除这一做法能使公司改善业务经营方式，同时拓展基金经理人的投资视野。
进一步说，这将改变金融研究行业的动态。目前，该行业被对冲基金的短期需求所左右。对冲基金行业交易快速，出手阔绰。
然而，业绩指引的支持者警告说，剥夺公司传达其收益潜力的能力，将打击规模较小的企业和高科技行业，因为这两者的融资依赖于与市场和投资者进行反复沟通。
但日益增多的季度指导反对者也警告称，过度关注短期价值将损害长期利润增长。
有人甚至认为，强迫公司达到季度目标可能会驱使公司走可疑的捷径。早在最近一波公司丑闻浪潮之前，巴菲特就将这些做法冠以“经营杂技”(operating acrobatics)和“会计游戏”(accounting games)的名号。
的确，许多企业治理专家认为，安然(Enron)和世通(WorldCom)等公司的经理们之所以会被引入犯罪的歧途，部分原因是他们极度渴望达到华尔街过于乐观的预期。
企业伦理商业圆桌会议学会(Business Roundtable Institute for Corporate Ethics)和分析师行业团体特许金融分析师协会(CFA Institute)近日共同发布了一份报告，该报告将带来大公司和投资专家颇具影响力的声音，进一步提高废除季度指导的呼声。企业伦理商业圆桌会议学会是一个强大组织的分支机构，该组织由美国一些最大企业的160名首席执行官组成。“执迷于短期业绩不能为股东创造价值，在很多情况下甚至还会破坏价值，”学会执行董事、该报告作者之一的迪安?克雷梅耶(Dean Krehmeyer)表示。
背离初衷
业绩指引于上世纪90年代开始流行，主要是由于法律变化允许公司做出前瞻性声明，以及股东要求增加透明度。当时它因为能够将公司的前景归结为简单的每股收益数字或区间而受到赞誉。
近20年后，首席执行官们提出异议，表示用一个多少美元多少美分的数字，既无法抓住一家公司的本质，也无法了解商业周期的变幻莫测。
“没有公司能精确地以某个百分率逐季增长，”零售商Office Depot董事长兼首席执行官史蒂夫?奥德兰德(Steve Odland)说。“真实情况不会这样。”
企业确定预期增长率的做法，给管理层带来了“达到预期数字”的压力，而对股东长期利益不加考虑。
共有约400名企业高管接受了约翰?格雷厄姆(John Graham)、坎贝尔?R?哈维(Campbell R. Harvey)与希瓦拉姆?拉杰戈帕尔(Shivaram Rajgopal)这三位学者的调查，其中逾80%的高管承认，为了达到收益目标，他们会削减研发、维护和雇佣等重要领域的开支。超过一半的受访者表示，他们会推迟新项目，即便这意味着牺牲长远利益。
企业专家们表示，这种每个季度取悦市场的责任，使公司的最高管理层夹在两个背道而驰的做法之间，不知如何是好。“公司被迫自问：我该设法达到（收益）数字，还是做最符合企业长期利益的事？”管理咨询公司麦肯锡(McKinsey)的合伙人蒂姆?科勒(Tim Koller)说。许多首席执行官私下承认业绩指引的负面影响，但他们表示，如果摒弃这种做法，股价将会受损。
弊大于利
分析师与基金经理人承认，业绩指引令他们更容易进行预测，并避免预测过于乐观或过于悲观的窘境。
然而，有证据表明，如果公司率先行动，这两个专业人士团体都将准备接受没有业绩指引的情况。在8万多名属于特许金融分析师协会会员的投资专业人士中，超过四分之三的人表示，他们希望公司抛弃给出季度指导的做法，而宁愿得到更多有关公司长期计划的信息。
“大多数投资者想要谈谈企业，而不是问管理层是否会使收益超过目标1美分，”瑞银环球资产管理公司(UBS Global Asset Management)前任首席投资官、特许金融分析师协会负责人杰弗里?迪尔迈耶(Jeffrey Diermeier)说。
尽管如此，首席执行官们指出，业绩指引有助于减小股价波动并提升估价。“有一种看法是，上市公司需要将季度业绩指引作为营销过程的一部分，”特许金融分析师金融市场整合中心(CFA Centre for Financial Market Integration)董事总经理库尔特?沙赫特(Kurt Schacht)表示。
的确，通用电气(General Electric)等公司不断达到苛刻的每股收益增长目标，因此建立了良好的声誉，并获得了可观的市值。
2月份，谷歌披露的业绩不及市场预期，导致股价重挫，当时观察人士批评该公司未能达到华尔街预测。
然而，几乎没有实证数据证明，提供指导有益于股价。麦肯锡考察了4000家营收超过5亿美元的公司，发现“没有证据表明，（业绩指引）影响市盈率、改善股东回报或降低股价波动”。事实上，许多对冲基金对一个事实不加掩盖，即它们通过“做空”公布收益不及指导水平的公司，获得了巨额利润。“业绩指引带来的问题比它解决的更多，”贝恩咨询(Bain & Company)合伙人罗布?马基(Rob Markey)说。“在意外的事情屡屡发生时，管理层通过给予指导，加剧了市场失望和忧虑的程度。”
积习难改
不可否认，美国上市公司对业绩指引的问题很清醒，但要做出改变则面临强大的障碍。
首先，分析师与基金经理人的薪酬乃至饭碗都极大地依赖于季度业绩。随着近几年交易量大幅上升，投资者持有一支股票的平均时间缩短到9个半月，突显出市场需要及时获得有关短期前景的信息。
“目前的两难窘境是，我们美国大众投资者的投资期限很短，”商业圆桌会议主席约翰?卡斯泰拉尼(John Castellani)表示。美国商业领袖的情形也同样如此。由于大型美国企业首席执行官的预期任期一般仅有5年，因此极少有人被认为会放眼长期目标。
一些政界人士和股东维权人士相信，可以通过税法惩罚频繁买卖股票的投资者，以此来改变人们的态度。但考虑到监管部门对业绩指引和投资决策等问题的发言权有限，立法部门的法令不可能限制投资者对短期行为的专注。
用全美投资者关系协会首席执行官路易斯?汤普森(Louis Thompson)的话说，就是：“如果想摆脱短期行为的锁链，你就得弄断所有环节。”
