Such an intense focus has been placed on quarterly earnings as an indication of a company’s success by everyone from analysts to executives that ethics have for the most part been thrown out the window, sacrificed to the all important number, i.e. earnings per share. This is the theory in Alex Berenson’s book “The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America.” This number has become part of a game to be played, a figure to be manipulated – beat the number and Wall Street all but throws a parade, miss it and a company’s stock may be abandoned. Take into account the incentives that executives have to beat the number and one can find plenty of reasons to manage earnings. In the first part of
This will be much more difficult given the global direction companies are charging towards – a company might have two or three different types of reporting requirements depending on the countries in which it’s located. This creates even more potential for producing misleading information. In reading this book it seems that the U.S. government has been reactive – agencies have been created and regulations have been passed after the dust has settled on huge frauds by investors and misconducts by accounting firms. While I agree that stronger governance is needed, I maintain that Berenson didn’t place enough importance on the fact that our culture today is demoralized and riddled with greed, which I believe should place the burden on individual investors to be informed and know what they’re doing with their money. Mention should be given also to the investor’s own greed and the fact that they’re willingly giving their money to companies about which they know absolutely nothing. I realize that the stock market is New York, not Mayberry, and that with all of the companies and with all the information and with the extremely fast pace that the world moves in today that it’s impossible to “know” a company, but it seems pretty irresponsible to me to trust someone with my money based just on a number. I believe that individual investors should be armed with as much information as possible,