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Should Google Have Warned Shareholders?

posted on February 1, 2006


Google blamed a higher than expected tax rate for the reason it missed expected earnings, raising the question of whether they should have warned investors. That’s exactly what The Age asks…

In the age of Sarbanes-Oxley, which aims to get more and better information to investors quickly, unexpected earnings misses create a dilemma for companies: If they know revenue or profit is going to come up short, are they obligated to disclose it in the course of a quarter?

“The senior management team should disclose that to the board,” said Craig Dunn, executive director of the Corporate Governance Institute at San Diego State University, when asked about the Google quarterly results. “The board, then, I think has a duty to report that to investors, whom they represent.”

Via Nathan.


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  • http://www.findinon.com MikeOK

    A higher than expected tax bill??? Are you kidding me? The yearly adjusted rate is only 1.6% higher than expected. If I were an investor, I would be calling for an investigation. Not seeing that the tax bill would be up, likely to due with a bump up in tax bracket, is total manipulation of the market.
    As for notifing, I see that as a red herring. The meat of the discussion should centre around how they “forgot” about this additional tax burdon.

  • http://www.blogger.com/profile/1685318 Andy Beal

    I agree. It’s one thing to not give guidance, it’s another to let your stock price continue to soar when you know you’re facing a higher tax burden.

  • http://www.blogger.com/profile/4410180 Nathan Weinberg

    I just can’t imagine that Google didn’t know its tax rate for the quarter would be 40% higher than expected. A company that held itself accountable would have told shareholders before the earnings report. Google doesn’t want to be held accountable, and it said so. Does that absolve them? I believe that when the market risks $150 billion in you, you can’t be as independent as you’d like.

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