Clinton, the front-running Democratic presidential candidate, said in a speech last month that many important elements of the U.S. economy – publicly traded companies and the executives that run them, shareholders and consumers – are held hostage to the “tyranny of today’s earnings report.”
“Everything is focused on the next earnings report or the short-term share price,” said Clinton. “The result is too little attention on the sources of long-term growth: research and development, physical capital and talent.”I think one of the big problems with quarterly capitalism is that companies are pressured to buy back shares in order to prop up their stock prices. I'm sure that cash can be plowed back into R&D or simply given as a dividend or a bonus for their employees. Instead that money is used to buy back shares which means a bigger bonus for senior managers with stock options and little else as far as I can see.
You also see big layoffs even though the company has profits because of a bad quarter. The company is still making money but they disappoint Wall Street and 1000s are laid off. Qualcomm comes to mind.
One way of looking at the problem with quarterly capitalism is Disney. I saw an interview with their CEO, Iger which he ticked off like 10 different billion dollar plus movie franchises one after another. Then they will open Shanghai Disneyland which will probably make some of the US Theme parks look like the State Fair. They have all sorts of billion dollar opportunities on the horizon and Iger let us know that.
Instead they have some subscriber slippage at ESPN and the stock drops from $121 to $108 in two days. This doesn't even take into account that Disney will probably offer ESPN as over-the-top service in the coming years and it will still be huge. I would easily pay $20 a month or more in order to watch ESPN on my Roku or Xbox One. It works for HBO so I don't see why it wouldn't work for ESPN which is a channel I watch every day. Quarterly Capitalism thinks that people are cutting the cord and subscribing to Netflix so Disney goes to $0 and Netflix is worth $700 billion. That has to be the most stupid thing ever but the stock market believes that.