President Trump asks SEC to study abolishing quarterly earnings reports

Gladys Abbott
August 19, 2018

U.S. President Donald Trump said Friday that he wanted the Securities and Exchange Commission (SEC) to explore doing away with quarterly corporate reports, replacing them with filings every six months.

In speaking to business leaders, one told him a twice-a-year reporting system would allow companies the flexibility and cost savings companies need to "Make business (jobs) even better in the U.S".

Public companies must report their sales, profits and the state of the company's balance sheet every quarter.

Some market commentators believe the pressure to meet targets every 90 days causes executives to make decisions based on short-term thinking to satisfy the market at the expense of the long-term viability of their companies.

The quarterly reports provide important insight into a company's potential trouble spots, and force its executives to address shareholders' concerns while enforcing corporate discipline, corporate governance experts say. Please read our before commenting.

"I'd like to see twice but we're going to see", Trump said.

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Tesla chief executive Elon Musk also cited the issue when explaining why he has launched a surprise effort to take the $50 billion auto company private.

Some investors on Friday said quarterly disclosures are essential for investment decisions and supported richer USA stock valuations, and that shares could become more volatile if companies report twice yearly. "Many investors and market participants share this perspective on the importance of long-term investing", he said. "And so they don't do it, because the definition of being a successful business is narrowed to what your quarterly earnings reports are".

Trump said the issue was brought to his attention recently by Indra Nooyi, the chief executive officer of PepsiCo Inc. The most recent data from the United Kingdom shows that only 57 of the companies in the benchmark FTSE 100 index were still issuing quarterly reports as of September 2017, according to the Investment Association.

Last fall it laid out changes to capital market rules in a U.S. Treasury report but did not advocate scrapping quarterly reporting.

The discussion with Pepsi's CEO wasn't the first time White House officials have heard from the business community about quarterly reporting requirements.

Quarterly earnings guidance is used by Wall Street and City analysts to build their earnings estimates and gauge company performance against these figures. In 1996, nearly 950 companies went public, according to data compiled by Bloomberg. A statistic they often point to is the drop in initial public offerings over the past 20 years. Visit MarketWatch.com for more information on this news. That number fell to 237 in 2017. "I'm not sure the earnings reports make that much of a difference".

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