-- =DJ Buffett Effect? Coke's New Policy Follows Warren's Stance --
By Brian Steinberg
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--Something new at Coca-Cola Co. (KO) is something long
familiar to investors in Washington Post Co. (WPO).
Atlanta's Coke said Friday that it would no longer update earnings guidance
for investors, because, as Coca-Cola Chairman and Chief Executive Douglas Daft
said in a statement, "establishing short-term guidance prevents a more
meaningful focus on the strategic initiatives that a Company is taking to build
its business and succeed over the long-run."
Such talk may be anathema to the average investor, who buys and sells based
on any loose comment about quarter-by-quarter earnings that drops from an
executive's lips. Market-watchers involved with Washington Post have heard talk
similar to Daft's come from the mouth of Post Co. Chairman and Chief Executive
Donald Graham for many years.
Perhaps it is no coincidence that Coke and Washington Post share a common
investor: Warren Buffett's Berkshire Hathaway Inc. (BRKA BRKB).
Buffett is well known for his ideas about managing for the long term, for a
decade from now rather than for a quarter from now. When companies focus too
much on meeting numbers for a three-month period, the philosophy holds, they
wander too far away from what should be a primary management goal: Growing the
company slowly and steadily for years to come.
"Warren Buffett is no shrinking violet," said Patrick McGurn, a special
counsel to Institutional Shareholder Services, a corporate-governance advisor to
large shareholders. Still, McGurn noted, "This isn't being dictated by Warren,
although he can be very persuasive." No doubt, he added, "there is definitely
some lobbying by Buffett," but when it comes to Coke, "a firm decision is being
made within the company to move in this direction."
Coke and Washington Post also follow another interesting policy, that of
expensing stock options. Another Berkshire holding, razor-blades-and-batteries
concern Gillette Co. (G), also subscribes to that philosophy, and stopped
offering earnings guidance in January 2001.
Donald Graham, Washington Post's top executive, regularly reminds investors
that his company, the force behind the Washington Post newspaper and Newsweek
magazine, eschews managing itself to meet earnings expectations each quarter.
Instead, he invites investors with a long-term focus to take a look at his
company's shares.
Did Buffett have a hand in Coke's decision? A person answering the phone in
the legendary billionaire investor's office in Omaha, Neb., Friday said he was
"on the road," and probably would not be available for immediate comment.
At Coke, the board of directors "considered it, discussed it and made this
decision," said a spokeswoman for the beverage company. Of course, Buffett
remains an active member of the board.
Nevertheless, said McGurn, "there has to be buy-in by management before" such
policies are put into effect. Buffett "has been urging Coke for a long time to
take charges for their stock options," he said, "but it wasn't until there was
substantial buy-in to the concept by Doug Daft and the other members of the
board that they took action."
- By Brian Steinberg, Dow Jones Newswires; 201-938-5218,
brian.steinberg@dowjones.com
(END) Dow Jones Newswires
12-13-02 1343ET- - 01 43 PM EST 12-13-02
Symbols:
US;BRKA US;BRK US;G US;KO US;WPO CH;KO DE;CCC GB;CCA PE;KO XE;KO
13-Dec-2002 18:43:00 GMT
Source DJ - Dow Jones |
