President Donald Trump asked the U. S. Securities and Exchange Commission (SEC) to look into the possibility of companies filing half-year earnings report as…
President Donald Trump asked the U. S. Securities and Exchange Commission (SEC) to look into the possibility of companies filing half-year earnings report as opposed to the current quarterly earnings reports the file.
Reuters reported that reducing the reporting requirements to bi-annually instead of quarterly would end up moving the United States rules closer to the rules that the European Union and the United Kingdom have adopted.
Like many other things, the POTUS announced his directive via Twitter this morning. He tweeted, “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!”
Later, reporters asked the president to give more insight into his tweet. According to a CNN Money report, Trump said, “I’d like to see twice, but we’re going to see. So we’re looking at that very curiously, we’re looking at twice a year instead of four times a year.” According to him, PepsiCo Inc Chief Executive Indra Nooyi who is leaving the company is one of the business leaders who broached the topic with him recently.
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!
— Donald J. Trump (@realDonaldTrump) August 17,2018
Since the Securities Exchange Act of 1934, public companies in the United States report their earnings each quarter. Initially, the Act’s provisions were created in order to give investors some transparency and instill some confidence after the stock market crash of 1929.
One reason for a possible change is that reporting every three months means that companies sometimes lose long-term focus because their efforts are spent on showing short-term profits each quarter.
Even former President Barack Obama spoke out against the short-term nature of the reporting requirements in 2015. He said, “Because they’ve got quarterly reports to shareholders and if they’ve made a long-term investment that may pay off way down the line, or if they’re paying their employees more now because they think it’s going to help them retain high-quality employees, a lot of times they feel like they’re going to get punished in the stock market. And so they don’t do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are.”
There are plenty of arguments both pro and con for this idea of twice a year reporting vs. four times a year reporting. The short-term and the long-term must be balanced for overall success in companies.
