"We are convinced that purchasing such protection is beneficial because it will reduce quarterly earnings volatility," he said in a recent report.

"They're going to have to deal with earnings volatility and vigorous competition."

"Are you going to judge the person on the entire record or the earnings volatility of the last few years?"

He also looks at projected earnings, earnings growth and dividends, as well as earnings volatility and debt.

"Pacific Resources will serve to integrate our petroleum activities and help reduce potential earnings volatility," he said.

Their problem is this: They surely do not want the earnings volatility caused by such activities, but they may need to keep good relationships in their industry in order to be effective.

The report said that the investigation found that a "desire by management to minimize earnings volatility was a central organizing principle in the development of key accounting policies."

Mr. Greenwald said fund sponsors, especially publicly owned ones, disliked performance fees because they tended to produce earnings volatility.

Spain's unusual accounting standards, intended to smooth earnings over the business cycle, have misled regulators and analysts by hiding losses and earnings volatility.

That would mean more reported earnings volatility, something managements hate.