Having just failed to deliver on one of his promises (10 percent earnings growth), Jeff Imelt, CEO of GE, is back to making promises (5 percent earnings growth!). I really like Elizabeth Nowicki's take on the matter: "stop making promises". He sounds like an untrustworthy lover in times like these, that thinks more promises is a substitute for promises unkept:
Memo to Immelt: Earnings do not have to grow each year. In some markets, in some economies, in some industries, in some “downturns,” simply having earnings – any positive earnings – is a good thing. Matter of fact, sometimes earnings should NOT be growing each year. Were I a GE investor, I would not want Immelt promising 5% growth for 2008 because I would figure that the only way he can promise to hit that number in such an uncertain market and gloomy economy is by committing to fudge year-end 2008 numbers if needed. And, as we learned several years ago, fudging year-end numbers tends to catch up with companies, and, when it does catch up, the valuation fall-out is worse than if the forthright disclosure (e.g. “2008 earnings might be flat”) had been made initially. Am I the only one who remembers back to the not-so-distant past, when unrealistic promises made to analysts by corporate officers led to companies cooking their books at year end to make the numbers? As I recall, things did not always work out so well in those cases. Enron, anyone?