Disclosure Advisory Board Responds to Chamber of Commerce Recommendations on Earnings Guidance

Disclosure Advisory Board Responds to Chamber of Commerce Recommendations on Earnings Guidance

March 22, 2007

Board raises concern about elimination of quarterly
guidance and focus on annual EPS range

    NEW YORK, March 22 /Xinhua-PRNewswire/ -- PR Newswire's
Disclosure Advisory Board, a 15-person council of leaders in
the corporate, regulatory, investor, reporting and academic
communities, expressed concern that recommendations about
earnings guidance by the U.S. Chamber of Commerce are too
narrowly focused.

    (Photo:
http://www.newscom.com/cgi-bin/prnh/20070321/NYW025
     Logo: 
http://www.newscom.com/cgi-bin/prnh/20000306/PRNLOGO )

    In its report entitled, "Commission on the
Regulation of U.S. Capital Markets in the 21st Century -
Report and Recommendations," the U.S. Chamber of
Commerce calls for eliminating quarterly guidance and
relying upon an annual range of projected EPS as the
primary means for forecasting performance. The Disclosure
Advisory Board believes that these recommendations could
stifle transparency, if implemented as a one-size-fits all
approach.  

    While sharing the Chamber's concern about
"short-termism" and the false precision of
single-point earnings estimates, the Board recommends a
more nuanced approach.  In the Board's view, companies
should consider guidance relating to key qualitative and
quantitative company and industry performance measures,
with time horizons tailored to their own circumstances and
business strategy.  An exclusive focus on annual EPS
guidance -- even expressed as a range -- would neglect both
the market importance of short-term investors and short- and
long-term objectives and risks that affect bottom-line
results.  The Chamber's report acknowledges the growing
interest among companies in providing long-term
perspectives on business fundamentals.  The Board endorses
this holistic approach as the proper focus of guidance, but
not to the exclusion of potentially significant short-term
performance perspectives. 

    Mark Hynes, managing director of Global Investor
Relations Services for 
PR Newswire and a member of the Disclosure Advisory Board,
responded, "We at the Disclosure Advisory Board
welcome the U.S. Chamber of Commerce into the debate on
guidance, but we believe that its recommendation that 'all
public companies should seriously consider the permanent
elimination of quarterly guidance on earnings per share,'
goes well beyond what is necessary.  By contrast, the
proposal that companies should move to 'annual guidance
with a range of EPS numbers' does not go far enough.  

    "As the Disclosure Advisory Board highlighted in
its white paper, 'Guiding Investors & Analysts: How
Much Information is Enough?' there are common circumstances
in which companies should use short-term guidance.  For
instance, the thirty-five percent of listed companies on
the NYSE and NASDAQ that have no analyst coverage are good
candidates for using quarterly guidance to meet investor
needs.  

    "On the other hand, the Board takes a much wider
view of the need for longer term guidance.  Painting a
picture through reviews of long-term strategies and goals,
industry metrics and trends, acquisitions and innovations
provides the tools for investors and analysts to better
assess a company.  Simply relying on annual EPS as a mark
of performance is too narrow.  The Board sharply delineates
between mere revenue and EPS forecasts and meaningful
guidance about business drivers.

    "It is also important that the issue of earnings
guidance not be viewed in isolation.  There is a growing
body of surveys and research demonstrating that short-term
earnings guidance can lead to management behavior that
focuses on meeting short-term earnings goals at the expense
of longer-term focus on R&D and other value enhancing
goals."

    To learn more about the Disclosure Advisory Board and
request a copy of the complete white paper, please visit
http://disclosureadvisoryboard.mediaroom.com/ .  To read
Mark Hynes' blog, go to
http://transparencymatters.blogspot.com/ .

    About the Disclosure Advisory Board

    The Disclosure Advisory Board was brought together by
PR Newswire in June 2006 to assess and comment upon the
state of corporate disclosure and transparency. Comprised
of 15 individuals with a combined 450 years of regulatory
and compliance experience, the aim of the Board is to
debate current disclosure and governance issues, and based
on the discussions, propose "best practices" for
improved financial and corporate reporting. The Disclosure
Advisory Board believes that communication -- disclosure
and transparency -- lies at the heart of winning back
public consent.

    Members of the panel are: John Bierbusse, corporate
director and retired equity research analyst at A G
Edwards; Janet L. Fisher, partner, Cleary Gottlieb Steen
& Hamilton LLP; Valerie Haertel, VP/director of
investor relations, Medco Health Solutions, Inc.; Jerry
Hostetter, VP/director of public relations and investor
relations, Smithfield Foods Inc.; Deborah Kelly, partner,
Genesis Inc.; Mark Hynes, managing director of Global
Investor Relations Services for PR Newswire; Jack L. Kelly,
co-head, industrial research team, Goldman Sachs; Mary Beth
Kissane, president and founder, Corporate Perception
Research; Sam Levenson, SVP Investor Relations, Sony
Corporation of America; William A. Relyea, managing
director, H.C. Wainwright & Co., Inc.; Diane Salucci,
SVP, Bear Wagner Specialists LLC; Kurt Stocker, member of
the board of directors of NYSE Regulation, Inc. and
chairman of the New York Stock Exchange Individual
Investors Advisory Committee; Anna Sussman, director,
Investor Relations and Corporate Communications, Pharmion
Corporation; Louis M. Thompson, Jr., partner, Genesis Inc.,
and managing director, Kalorama Partners, and former CEO,
president and board member of the National Investor
Relations Institute.

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    For more information, please contact:

     Rachel Meranus
     Vice President, Public Relations
     PR Newswire
     212.282.1929
     [e-mail]