Securities and Exchange Commission chairman William H. Donaldson, dissecting last year's corporate scandals in a speech, said companies in general got caught up in the bull market of the 1990s and slavishly played the earnings projection game.

That "created an atmosphere in which 'hitting the numbers' became the objective, rather than sound, long-term strength and performance," Donaldson told a meeting of the National Association for Business Economics, a group that includes economists working for companies as well as government and university economists.

The preoccupation with quarterly earnings "is a bad one and has had a bad effect on management" and creates a temptation for companies to inflate earnings, said Donaldson, an investment banker who was chairman of the New York Stock Exchange in the early 1990s.

"Blind adherence to quarter-to-quarter reports is something that needs to be reexamined," he told reporters after the speech.

Companies' desires to meet Wall Street's expectations for their earnings have been identified as the motivation behind artificially inflated earnings in the accounting scandals.

Donaldson took the SEC helm last month, several months after his successor Harvey Pitt resigned under fire after a series of high-profile political missteps. Donaldson recently challenged U.S. corporations to behave more ethically than the law requires to help restore investors' trust shattered by the scandals.