Scene: Wall Street Journal executive breakfast series
Jeff Immelt, chairman and CEO, GE
Alan Murray, deputy managing editor, WSJ
(Lights up on dais. Murray launches into Q&A, grilling Immelt on GE’s shocking earnings miss last year, and pulling back on guidance.)
Immelt: It was a credibility knock.
Murray: You didn’t feel like it was a failure in the flow of information to you? [Was] it just a market change?
Immelt: I think always when that happens you have to change the way, the speed and the frequency of information and we’ve tried to learn and get better and do a better job in the timing of how we discuss things with each other, the ranges and the scenario planning…
Murray: So it changed the way information flows inside the company, but also your attitude toward what kind of information you put out?
Immelt: Both of those.
Murray: Is giving guidance on earnings just a mistake?
Immelt: There have been a million articles about it, right? I always thought at some point it was best for GE to get out of giving guidance. I was hoping to wait for like a calm sea in which to do it. [Big laugh]. It turned out to be never a calm sea.
But I think a company our size, for the investor we are trying to attract, giving quarterly guidance just creates too much volatility and that’s ultimately the decision we made.
Murray: Do you think that will go away for other companies?
Immelt: I think it’s largely already going away. I think there are a lot of people in our sector that went from giving quarterly to giving annual guidance. Reg FD actually created more scrutiny around quarter points than it solved, so that was a little bit of the issue as well.
I think we like where we’re at right now in the way we communicate about the company.