President Trump’s call on Monday to allow publicly traded companies in the U.S. to report earnings every six months instead of on a quarterly basis did not appear to be a very popular proposal, at least not with people outside of his administration.
In a post on Truth Social, Trump said that if the SEC were to approve letting companies report their earnings every six months, it would “save money, and allow managers to focus on properly running their companies.”
“Did you ever hear the statement that, ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!” Trump added.
The SEC released a statement saying that Chairman Paul Atkins would be “prioritizing” Trump’s request – but it’s unclear what that entails.
“At President Trump’s request, Chairman Atkins and the SEC are prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies,” the regulator said in its statement.
Trump also pushed to change the reporting rules during his first term, but the SEC did not move forward with changing its policies.
U.S. Treasury Secretary Scott Bessent told CNBC on Tuesday that Trump’s plan to have companies report every six months would actually benefit investors.
“President Trump realizes that whether it’s the U.K., [or] it is the U.S., our public markets are atrophying, and this might be one way to bring back and cut costs for public companies without harming investors,” he said.
Trump’s proposal would put U.S. reporting requirements more in line with the European Union, which ended its mandate for quarterly reporting in 2013. One of the reasons for rolling back this requirement was to discourage “short-termism,” where investors focus on quarterly earnings targets instead of developing a longer-term investment horizon.
Is quarterly guidance the real problem?
However, critics of the move argue that one of the reasons the U.S.equity markets are considered the gold standard is because of the more stringent financial reporting requirements –
and doing away with these rules could mean that U.S. stocks would no longer trade at a premium compared to equities in other parts of the global markets.
“This is a terrible idea,” Steven Rattner, chairman and CEO of Willet Advisors, said in a post on X. “The more information that investors receive, the more transparent and efficient markets become, lowering the cost of capital for good performers.”
Herb Greenberg, longtime financial journalist and CNBC contributor, said that the problem isn’t quarterly earnings, but rather the guidance that companies provide during their earnings.
“Reporting quarterly is a good thing,” he said. “The issue is guidance, short OR long-term. THAT'S what creates the short-term volatility as the algo's and everybody else play to THAT, and companies kowtow to the ‘meet or beat’ game.”
David Kass, a professor of finance at the University of Maryland, noted in a post on X that Warren Buffett and JPMorgan CEO Jamie Dimon wrote an op-ed in The Wall Street Journal in 2018 in which they called for an end to quarterly guidance – but not quarterly earnings – because “it pressures management to prioritize short-term profits (meeting forecasts) rather than investing in growth, hiring, R&D, or other long-term value creation.”
Rep. Eric Swalwell, a Democratic Congressman from California, slammed Trump’s proposal, saying that it “isn’t about efficiency,” but rather “shielding companies from accountability.”
“If execs can’t handle 4 reports a year, should they really be running billion-dollar businesses?” Swalwell said.
To be sure, not everyone was opposed to the idea of changing the reporting rules.
Adena Friedman, chairman and CEO of Nasdaq, said in a post on LinkedIn that the index is “a strong supporter of common-sense reforms to reduce the burden on publicly listed companies, including reforms that would give companies the option to report either quarterly or semi-annually.”
“By minimizing the friction, burden, and costs associated with being a public company we can further invigorate the U.S. capital markets, unlock new job creation, and accelerate the growth of our economy,” she added.
But of course, even if the SEC changes its rules and stops mandating that companies report quarterly earnings, it’s possible that many companies will continue to do so anyway.
"Overwhelmingly the practice would stay just as it is," M. Todd Henderson, a law professor at the University of Chicago and an expert on securities regulation, told Reuters. "That companies' behaviors are wildly distorted by short-termism is certainly true in some cases but it's not a system-wide phenomenon."
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