Trump takes aim at quarterly reports

Cornelia Mascio
Agosto 19, 2018

America's 4,300 public companies publish financial statements every three months under a rule from the Securities and Exchange Commission (SEC) that dates back to 1970.

According to Mr Trump, top business leaders from around the world claimed that removing the administrative burden of such regular reporting would boost the United States economy and create jobs.

Trump said Nooyi, who will step down in October after 24 years at PepsiCo, had brought the idea of the reporting change up to him at a business roundtable meeting on August 7, at Trump's golf club in Bedminster, New Jersey.

In a tweet early today, Trump said that after speaking with several top business leaders, he's asking the Securities and Exchange Commission to determine whether shifting to a six-month reporting requirement would help companies grow faster and create more jobs. Using Bloomberg data that looks at 10-day volatility in single stocks since 2010, price swings during the four reporting periods are roughly 10 per cent higher than in the rest of the year.

Quarterly financial reports are a staple of USA corporate practice.

"I'd like to see twice (a year), but we're going to see", Trump said. "In the end, all companies have to balance short-term and long-term performance", Nooyi said.

Companies that want to distance themselves from short-term scrutiny should instead stop publicly projecting the next quarter's earnings, Pozen added. But moving away from reporting earnings every three months would be a much more dramatic change that would nearly certainly trigger resistance from shareholders who want transparency from the companies they invest in. "It's a lot of work to report every three months", said Charles M. Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.

There are also tremendous expenses associated with preparing quarterly and annual reports. That can pressure executives to engage in reckless practices to hit quarterly targets or even to manipulate earnings reports. Two influential figures, JPMorgan Chase CEO Jamie Dimon and billionaire investor Warren Buffett, recently urged together that public companies either reduce or eliminate quarterly earnings guidance.

"It is not the fact that you report quarterly that is the problem; it's a bad management team", he said.

But Trump's proposal goes much further, worrying shareholder advocates who have been calling on corporations to disclose more information, not less.

Half-yearly reporting would mark a huge change in US disclosure requirements and put them in line with European Union and United Kingdom rules.

Business executives pressing for less frequent financial reporting maintain that the costs of putting together quarterly as well as annual reports are burdensome. A spokeswoman for Chairman Jay Clayton did not respond to a request for comment.

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