Showing posts with label Berkshire Hathaway. Show all posts

Wednesday, March 18, 2026

Strategic CSR - Earnings guidance

Well, this isn't exactly the rationale I was hoping for, but the article in the url below notes that more companies are refusing to issue quarterly earnings guidance -- a blow to the short-term thinking (and misguided focus on shareholder value) that dominates our economic system:

"Et tu, Walmart. Analysts covering the world's largest retailer will have to sharpen their pencils now that it has joined several other companies in scrapping quarterly earnings guidance (it kept it for the full year)."

It seems that the uncertainty injected into the economy, in recent months, is the 'excuse' CEOs are drawing on to avoid the glare of quarterly expectations:

"'Uncertainty' is practically a dirty word on Wall Street. After competitors scrapped their public forecasts, United Airlines instead took the unusual step last month of publishing two scenarios—one for a recession and another for an expansion."

As the author notes, however, the better approach might have been to scrap earnings guidance (i.e., not earnings reports) altogether:

"Unfortunately, that is a luxury mainly available to elite CEOs who are extremely secure in their jobs: Apple's Tim Cook, JPMorgan Chase's Jamie Dimon and, of course, Warren Buffett, who recently announced his impending retirement after six decades running Berkshire Hathaway."

Such a narrow focus on shareholder value, of course, is a relatively recent phenomenon, driven by neoliberal economic theory in the twentieth century (which resulted in most CEOs today being paid using stock options). But there is a strong argument to say that, not only is shareholder value a theory (rather than a legal fact), but that a singular (or even primary) focus on delivering it can be counterproductive to the long-term interests of the organization:

"Henry Singleton might be the greatest example of an executive who delivered with minimum regard for what Wall Street thought. Teledyne, the conglomerate he founded and ran for almost three decades, was a hot stock in the 1960s. … He was 'the smartest businessman I ever knew,' said the late Charlie Munger, who was vice chairman of Berkshire Hathaway."

Broad stakeholder support for not issuing guidance, particularly from the board and other key stakeholders, is what is required for CEOs to have the confidence to make decisions for the medium to long term, which is how the optimal level of value is created. While somewhat regular earnings reports are essential to allow for adequate oversight and governance mechanisms, quarterly earnings guidance is an unnecessary legacy of a disproportionate focus on shareholder value, which can be unhealthy, as noted in the article in the second url below:

"What would not be painful: a voluntary reduction in 'quarterly guidance,' or forecasts, by executives about how they expect their companies to fare. Warren Buffett of Berkshire Hathaway and Jamie Dimon of JPMorgan Chase recommended this change in a Wall Street Journal essay in 2018. Companies routinely use these forecasts to manipulate the expectations of financial analysts so that when earnings reports ultimately arrive, they constitute 'positive surprises' that set off rallies in the companies' shares."

While the article in the third url below suggests this development is gaining momentum and possibly being extended to earnings reports:

"The Securities and Exchange Commission is preparing a proposal to eliminate the requirement to report earnings quarterly and instead give companies the option to share results twice a year, according to people familiar with the matter. The regulator could publish the proposal as soon as next month."

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (6e)

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler6e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Elite CEOs Don't Need Earnings Guidance

By Spencer Jakab

May 16, 2025

The Wall Street Journal

Late Edition – Final

B12

https://www.wsj.com/business/elite-ceos-dont-need-earnings-guidance-a0e5de93

Is The the Time to End Quarterly Earnings Reports?

By Jeff Sommer

October 5, 2025

The New York Times

Late Edition – Final

BU4

https://www.nytimes.com/2025/10/02/business/trump-earnings-reports-investing-stocks.html

SEC Prepares Proposal to Eliminate Quarterly Reporting Requirement

By Corrie Driebusch

March 16, 2025

The Wall Street Journal

https://www.wsj.com/finance/regulation/sec-prepares-proposal-to-eliminate-quarterly-reporting-requirement-1d700bbb

Tuesday, October 8, 2019

Strategic CSR - Warren Buffett

I am not normally a fan of Warren Buffett as I think many of the companies he invests in (e.g., Wells Fargo, Coca-Cola, Kraft/Heinz, Dairy Queen, See's Candies, etc., etc.) and even the companies he partners with (e.g., 3G Capital) are hurting, rather than helping, society progress. I also think his investment decisions are luck as much as anything else, given his ill-judged support for CEO pay policies at Coke (that do not reflect performance), his strong support for the train company BNSF (when some 40% of rail freight in the U.S. is coal), or his aversion to investing in IT stock (he only got into Apple by mistake). All of this might somewhat explain why the WSJ recently noted that "Berkshire Hathaway Inc. has underperformed the S&P 500 for a decade … during a historic bull market." Like many executives that have run out of ideas, his main response appears to be to buy back his own firm's shares. But, that is not to say that the man has no idea what he is talking about. In the article in the url below, at least, he is on solid ground by proudly advocating in favor of capitalism:

"The most prominent face of capitalism — Warren Buffett, the avuncular founder of Berkshire and the fourth wealthiest person in the world, worth some $89 billion — appeared to distance himself from many of his peers, who have been apologizing for capitalism of late. 'I'm a card-carrying capitalist,' Mr. Buffett said. 'I believe we wouldn't be sitting here except for the market system,' he added, extolling the state of the economy. 'I don't think the country will go into socialism in 2020 or 2040 or 2060.'"

The author notes that this frank statement stands in contrast to some business leaders who profess statements on controversial issues that go with popular sentiment, only to quickly reverse their position when the spotlight has moved on:

"Some billionaires agonize about inequality and the education system, for example, but don't push for higher taxes on the wealthy to help pay for fixes (one of Mr. Buffett's preferred remedies). A raft of chief executives who boycotted going to Saudi Arabia after the murder of Jamal Khashoggi last year quickly returned to doing business with the kingdom when the headlines died down."

I am not convinced that Buffett thinks any more about the detail of advancing society than other business leaders—he is simply convinced that capitalism is the most direct way of getting there:

"… at his core, [Buffett] believes that the pursuit of capitalism is fundamentally moral — that it creates and produces prosperity and progress even when there are immoral actors and even when it creates inequality."

In this sense, he is following a strategic CSR perspective. In his investment decisions, however, he consistently veers off-track.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (5e)

Instructor Teaching and Student Study Site: http://studysites.sagepub.comstudy.sagepub.com/chandler5e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

Warren Buffett's Case for Capitalism

By Andrew Ross Sorkin

May 6, 2019

The New York Times

Late Edition – Final

https://www.nytimes.com/2019/05/05/business/warren-buffett-capitalism.html

Thursday, October 13, 2016

Strategic CSR - Warren Buffett

If you are an active investor, you are likely aware that Warren Buffett releases an annual letter to Berkshire Hathaway's shareholders. In this year's letter (released in March), he addressed the issue of climate change. In particular, he analyzed the issue in relation to Berkshire Hathaway's sizeable holdings in the insurance industry. Perhaps surprisingly, he was very bullish on the prospect of widespread environmental degradation:

"As a citizen, you may understandably find climate change keeping you up nights. As a homeowner in a low-lying area, you may wish to consider moving. But when you are thinking only as a shareholder of a major insurer, climate change should not be on your list of worries."

His reasoning rests on the somewhat ignorant argument that climate change has yet to produce any change in the number of extreme weather events:

"Up to now, climate change has not produced more frequent nor more costly hurricanes nor other weather-related events covered by insurance. As a consequence, U.S. super-cat rates have fallen steadily in recent years, which is why we have backed away from that business. If super-cats become costlier and more frequent, the likely – though far from certain – effect on Berkshire's insurance business would be to make it larger and more profitable."

As the article in the url below notes, however, this view contradicts the current scientific consensus. I imagine it is also not consistent with those in the north-east of the U.S. who were standing in the way of Hurricane Sandy when it hit in 2012:

"This claim flies in the face of growing scientific evidence. In 2014, the federally funded National Climate Assessment stated that: 'Certain types of extreme weather events with links to climate change have become more frequent and/or intense, including prolonged periods of heat, heavy downpours, and, in some regions, floods and droughts.'"

Moreover:

"Other insurers have already expressed concern about these changes. Carl Hedde, head of risk accumulation for insurer Munich Re America, says: 'The number of loss-relevant, weather-related natural catastrophes worldwide has almost tripled since 1980 […] we do think that the warming climate – depending on region and peril concerned – does play a certain role.'"

What is even more striking is the contrast between what Buffett said in this year's letter and what he has said in previous year's letters (as noted in the article in the second url below):

"Buffett certainly understands the danger of miscalculating risks. In his 2007 shareholder letter, he wrote that 'devastating storms' like Hurricane Katrina could 'rock the insurance industry.' 'We do know it would be a huge mistake to bet that evolving atmospheric changes are benign in their implications for insurers,' Buffett said then."

Buffett has demonstrated similar insensitivity to shifts that are occurring in other industries, too. He has recently reiterated his strong support for the railroad industry (in particular, Burlington Northern Santa Fe), even though between 30 and 40% of revenues in this industry come from the transportation of coal. In banking, I have not seen or heard any demonstrable comments about the recent behavior at Wells Fargo, which has now resulted in the CEO's resignation. And in the food industry, by doubling down on his support for Coca-Cola, not to mention Dairy Queen and last year's merger between Kraft and Heinz, he appears willing to squeeze as much revenue out of these fading brands, irrespective of the healthcare consequences of the salt, sugar, and fat that are stuffed into each of the company's products.

As a European living in the U.S., it seems counter-intuitive to me that Buffett should be praised for doing so much good with the fortune he has amassed (by pledging it to the Gates Foundation), without some comment on the social consequences incurred during the accumulation of that fortune. To me at least, doing good with a fortune once you have it does not justify the methods used to build that fortune.

Take care

David

David Chandler

Strategic Corporate Social Responsibility: Sustainable Value Creation (4e)

Instructor Teaching and Student Study Site: https://study.sagepub.com/chandler4e

Strategic CSR Simulation: http://www.strategiccsrsim.com/

The library of CSR Newsletters are archived at: https://strategiccsr-sage.blogspot.com/

The big flaw in Warren Buffett's view of climate change

By Thomas P Lyon

March 7, 2016

The Guardian

http://www.theguardian.com/sustainable-business/2016/mar/07/warren-buffett-climate-change-insurance-policy-berkshire-hathaway-shareholder-letter

Warren Buffett to shareholders: Climate change is nothing to worry about

By Alison Moodie