President Donald Trump said he's asked the Securities and Exchange Commission to study ending quarterly reporting for U.S. businesses.
In a Twitter post Friday, Trump wrote: "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!"
The chief executive officer who urged Trump to look into six-month reporting is PepsiCo Inc.'s Indra Nooyi, the president told reporters in Washington after sending his tweet.
SEC spokesmen didn't respond to requests for comment.
The SEC enjoys some level of distance from the White House because it's an independent agency. It's rare for presidents to make public demands of such regulators.
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 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.
However feasible or likely the plan is, the tweet does represent the sort of business-minded approach that corporate America hoped it would get from having a former executive in the White House. Trump's tax cuts and deregulation push have long earned their favor -- and Friday's proposal can be seen as part of that effort. Proponents say easing another regulation would help spur growth.
But 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 financial reports are a staple of U.S. corporate practice. The SEC requires public companies to report profit, revenue and other figures publicly every three months. The requirement dates to the establishment of the agency in the 1930s Great Depression, as a way to give investors confidence in company information.
Bank analysts are 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.
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."
The U.S. Chamber of Commerce and other lobbying groups have blamed compliance burdens for preventing more companies from selling shares. A statistic they often point to is the drop in initial public offerings over the past 20 years. In 1996, almost 950 companies went public, according to data compiled by Bloomberg. That number fell to 237 in 2017.
But some academics have argued that criticizing regulation oversimplifies the situation. Firms have an ever-expanding menu of ways to raise money outside the stock market.
Information for this article was contributed by Ben Bain, Terrence Dopp, Justin Sink, Toluse Olorunnipa, Justin Sink, Annie Massa and Ben Bain of Bloomberg News and by Marcy Gordon of The Associated Press.
Business on 08/18/2018