Berkshire Annual Letter 2000 (Part 3)
At Berkshire, full reporting means giving all the important facts about current operations as well as the CEO’s frank view of the long-term economic characteristics of the business.
There is neither vague accounting methodolody, nor messages prepared by the public relations department.
Fair reporting means getting the same information to all 300,000 members simultaneously. For that reason, reports are usually put on the internet after the market closes on Friday.
At some other major corporations, there has been a spread of “selective disclosure”. It has become standard practice to “guide” analysts to earning expectations that is a tiny bit lower than what the company truly expected to earn.
Both Warren Buffett and Charlie Munger thinks that it is dangerous for CEOs to predict growth rates for their companies. These predictions often lead to trouble.
They spread unwarranted optimism and corrode CEO behaviour. Fewere than 10 out of the 200 most profitable companies in 2000 will be able to attain a 15% annual growth for the next 20 years.
Many CEOs have thus engaged in accounting maneuvers so that they can meet their earnings target.