According to a tweet from President Trump, he asked the Securities and Exchange Commission to study the possibility of moving from quarterly to semi-annual reporting for public companies.
In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S. “Stop quarterly reporting & go to a six month system,” said one. That would allow greater flexibility & save money. I have asked the SEC to study!
From a compliance perspective, the issue is more about quarterly guidance, than quarterly reporting.
The broader argument is about short-term focus on reported numbers than the long term focus of the company. I’m not sure that would work out that way or change things. There are many people smarter than me that have written detailed research papers on the topic. They don’t seem to have reached a conclusion.
According to a story in Wall Street Journal, the impetus of Trump’s tweet was a meeting with outgoing PepsiCo CEO Indra Nooyi. During a dinner with the President, he asked “What can we do to make it even better?” According to the Wall Street Journal: “she said, ‘Two-time-a-year reporting, not quarterly.’”
Will companies switch if you make the regulatory change?
Probably not.
The European Union made this change in 2014. Less than 10% of UK companies switched from quarterly to semi-annual.
Institutional investors report their results quarterly and expect their underlying investments to report quarterly. Companies would need to convince shareholders to accept less frequent reporting.
The other aspect is contractual obligations for quarterly reporting. Most companies have a obligations to their lenders for quarterly reporting. That would not go away just because of the regulatory change.
Then there is the question of whether President Trump’s tweet amounts to an official action by the White House. We seem to have a mixed message form some sources as to whether its an official order or not.
Sources:
- Trump Asks SEC to Study Semi-Annual Reporting (Big Deal or Big “So What?”) by John Jenkins in The Corporate Counsel .net
- Trump Asks SEC to Study Six-Month Reporting for Public Companies by Dave Michaels, Michael Rapoport and Jennifer Maloney in the Wall Street Journal
- A Guide to the Pros and Cons of Trump’s 6-Month Earnings Plan by Annie Massa and Miles Weiss in Bloomberg
- Donald Trump’s sudden interest in quarterly earnings reports, explained by Emily Stewart in Vox
