Columbia Journalism Review Needs to be Reviewed

Mark R. Mitchell, writing yesterday for the CJR Daily starts with the following:

Every executive on the planet -- except those on Wall Street -- already knew it. But now it's official: quarterly earnings reports are completely "meaningless." They are nothing more than a "fool's game" played by corporate managers to "please Wall Street, their shareholders, and all of the bloggers and talking heads on cable TV."

So decreed U.S. Chamber of Commerce president Tom Donahue yesterday, and we can only assume that he was speaking on behalf of the three million CEOs that his organization represents. We can also assume that those executives have saved a few dunce caps for the folks at the Washington Post, which reported Donahue's speech and then placed the article on the Post Web site --  just above five excruciatingly dull and utterly irrelevant stories about various corporation's quarterly earnings reports.

There's just one problem here, Tom Donahue, the chamber of commerce president wasn't talking about "quarterly earnings reports".  Had Mark R. Mitchell actually read the first paragraph of the Washingt Post article to which he links, he would have seen that Mr. Donahue was talking about the practice, among companies, of giving quarterly guidance, which can be a useless game:

U.S. Chamber of Commerce president and chief executive Thomas J. Donohue on Wednesday called on all publicly traded companies to stop offering quarterly earnings guidance, saying such predictions create a damaging focus on "meaningless short-term performance" and undermine a company's ability to manage for the long term.

"Earnings projections are a fool's game for management," Donohue said at a conference organized by the Wall Street Analyst forum. "Companies want to project numbers that will please Wall Street, their shareholders, and all of the bloggers and talking heads on cable TV.

Mr. Mitchell's surprising misreading of Mr. Donahue, regrettably prompted a bizarre rant against the practice of the media reporting on earnings:

The entire exercise raises the question: Who reads these things, which are posted on news Web sites or printed in newspapers long after they've been released by tickers (Bloomberg, Reuters, Dow Jones) or by companies themselves? Certainly not most executives, who recognize that except in the most extreme of cases, short-term numbers say nothing about a company's long-term health. And certainly not day traders or other short-term market gamblers, who have already digested the data. We would be surprised if editors themselves read these stories, sounding as they do like verbatim regurgitations of corporate press releases.

Yet, they're here again, as consistent as locusts -- the ridiculous "latest number" stories that infest the business pages and devour reporters' time for several weeks each and every quarter. Today alone, the Wall Street Journal treats us to no less than five of these snoozers.

While, it would be nice to see newswire earnings recap articles go into a little more depth, Mark Mitchell's chief complaint seems to be that quarterly results are useless, and thus it's a boring waste for the media to deign to reporting on them.  Mark's entitled to his viewpoint, but since his role at the Columbia Journalism Review is to critique and monitor the media, you'd think he'd read more closely the articles he's writing about.

Comments

[Mark Mitchell]

Actually, the Chamber of Commerce president was talking about quarterly guidance AND quarterly earnings. He is quoted in the Washington Post article as follows:

"Warren Buffett and others have very publicly voiced concern about this focus on quarterly earnings and, in particular, guidance about future" earnings per share, he said. "But they speak for themselves and their companies. As the head of the nation's largest business organization, I can tell you that CEO frustration with earnings expectations is widespread and rapidly growing."

The point is that the media relentlessly focuses on quarterly earnings at the expense of serious analysis of a company's financial well-being, and it does this largely because it spends too much time talking to fund managers and traders. The measure of a company's health is its potential for long-term growth, not whether it happened to have spent more or less in a given three-month period.

Mark Mitchell
CJR Daily
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