President Donald Trump said he’s asked the Securities and Exchange Commission to study ending quarterly reporting for U.S. businesses in order to ease regulations and spur growth.
“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!” Trump said in a Twitter post Friday.
The regulatory burdens of being a public company have been in the spotlight lately, including playing a role in why Elon Musk wants to take Tesla Inc. private. And corporate leaders and trade groups have increasingly vented about Wall Street’s obsession with short-term earnings and revenue targets, arguing that they can prevent firms from growing their businesses and creating jobs.
A top criticism is that if companies are striving to report profit gains every quarter, they are more likely to buy back shares and cut costs than invest in their businesses.
Earlier this year, Berkshire Hathaway Inc.’s Warren Buffett and JPMorgan Chase & Co.’s Jamie Dimon urged companies to stop issuing quarterly earnings guidance.
Moving away from reporting earnings every three months would be a much more dramatic change that would almost certainly trigger resistance from shareholders who want transparency from the companies they invest in.
“Investors will demand they get their information,” Ed Yardeni, founder of Yardeni Research Inc., said in a Bloomberg Television interview. “Short-termism, that’s been floating around for a long time, just doesn’t jibe with the facts. The idea that companies have been taking all their profits and just buying back shares, paying dividends and spending nothing on employees and capital spending, it’s just not right.”
Quarterly reporting has long been a cornerstone of U.S. capital markets, with bank analysts known for making closely monitored recommendations on buying or selling stock tied to the numbers. While some business leaders have groaned about the rigors associated with having to disclose financial figures four times a year, the SEC has been reticent to make any changes.
SEC Chairman Jay Clayton, a Trump nominee, has said increasing the number of public companies and initial public offerings are among his top priorities. Still, Clayton hasn’t floated reducing the number of times that companies must disclose their financial performance each year.
The SEC could make such a change on its own without Congress passing legislation but that doesn’t mean it will, said David Martin, who previously ran the agency unit that oversees corporate filings.
“You’re probably going to get a debate where you have people saying these reports are unnecessary, and I don’t think that will convince a lot of people,” said Martin, who’s now a senior counsel at the law firm Covington & Burling. “On the other side will be the argument that information is basically a lubricant of a great capital-markets system.”