Monday, December 18, 2006
And Beware CEOs Trying to “Hit the Numbers”
Tom Bender might be a great guy, for all I know.
And he might be a great CEO, too, although he does run The Cooper Companies, a contact lens maker whose news flow has been uniformly bad of late—so bad that its stock happens to be one of the only companies in the world trading closer to its 52 week low than its 52 week high.
But if the company’s recent conference call was any indication, the outside observer would not know how great he is.
I say this not because the word “decline” appears nine times in the earnings call transcript—bad things do happen to good people and good companies on occasion.
I say it because, after recounting the litany of woes resulting in the latest earnings miss, Bender says the following about the objectives he’s set for the upcoming year:
Let me talk a little bit about some of the objectives that we have for 2007. Number one, most important and most important to all of you is to hit our guidance.
I am not making that up.
Now, if Mr. Bender honestly thinks that the “number one” objective of his company should be “to hit our guidance” for the sake of Wall Street’s Finest and their precious earnings models, then he is about as far removed from what really makes a company great as a CEO can be.
Not only can the focus on hitting a meaningless, and often unsustainable, profit forecast result in stupid, short-term decision making; it can also, as in the case of Tyco, Fannie Mae, Enron, and a list of other companies large and small too lengthy to bother with, result in fraud.
As with morons writing blogs, beware a guy at the top whose chief goal is to “hit the numbers.”
I Am Not Making This Up
© 2006 Jeff Matthews
The content contained in this blog represents the opinions of Mr. Matthews. Mr. Matthews also acts as an advisor and clients advised by Mr. Matthews may hold either long or short positions in securities of various companies discussed in the blog based upon Mr. Matthews' recommendations. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author.
Posted by Jeff Matthews at 8:50 AM