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Founders give CEOs air cover
The 90-day clock
The 90-day clock sets the questions. Investors ask what happened in the last quarter and what will happen in the next one, and almost no one asks what the company is doing today to preserve, protect, and grow the investment for decades.
Backing the CEO
Mitch Rales and his brother Steve no longer run Danaher day to day, which spares them that grind. They use the freedom to back each CEO in the boardroom and with outside investors, so the CEO can work on long-term vision while still handling the quarter-to-quarter business. Investors have come to see that a board can play a valuable role in stewarding a business for the long term.
Looking ahead to 5.0
The same distance lets the founders look ahead of their CEO. The fourth era of Danaher has been in progress for several years and has a year or two to go, and the founders have already started thinking about what 5.0 will look like, though they do not know the answer yet. The culture of continuous improvement and long-term thinking at Danaher is understood but not appreciated.
Why do public companies report every quarter?
Companies also hold earnings calls, where analysts press executives on recent results and near-term guidance. Because stock prices react to each report, executives pay attention to the next one. The US Securities and Exchange Commission began requiring quarterly reports on Form 10-Q in 1970.
How do executives manage earnings targets?
A 2005 survey of more than 400 financial executives by John Graham, Campbell Harvey, and Shiva Rajgopal found that 78 percent would give up economic value to smooth earnings. More than half said they would avoid starting a project with positive value if it meant missing the quarter. The study was published in the Journal of Accounting and Economics.
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