Warren Buffett, who is among business executives pushing for improved corporate governance, said that the practice of telling Wall Street what to expect from quarterly earnings can distort management's priorities.
"Guidance can lead to a lot of malpractice," the billionaire chairman of Berkshire Hathaway Inc said Thursday on CNBC.
"It doesn't have to, but I think if the CEO goes out and says, 'We're going to earn $1.06 next quarter,' I think that if they're going to come in at $1.04, there's a lot of attempts to find a couple extra pennies some places."
A group of the US financial industry's most powerful leaders, including Buffett, BlackRock Inc's Laurence D. Fink and JPMorgan Chase & Co's Jamie Dimon have released a letter and report detailing what they called "commonsense" recommendations for public companies to improve governance and relations with shareholders.
Their suggestions include urging companies to refrain from short-term earnings forecasts, embracing corporate transparency and pushing for independent boards.