6-MONTH WINDOW
Trump asks SEC to weigh twice-a-year results
President Trump on Friday asked federal regulators to look into cutting in half the number of times public companies have to report results.
Instead of the required four quarterly reports, companies would have to report to shareholders only twice a year if the proposal is approved.
Such a model has been used in Europe since 2013.
“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 US. ‘Stop quarterly reporting & go to a six month system,’ said one,” Trump tweeted early Friday, sending shock waves through Wall Street and Washington.
“That would allow greater flexibility & save money. I have asked the SEC to study!” he added.
Such a move has been championed by some in business as a way to play down short-term focus and increase long-term planning.
Critics panned the potential move as reducing transparency.
Trump told reporters hours later on Friday that the business leader who made the suggestion was departing PepsiCo Chief Executive Indra Nooyi.
Reached later in the day, Nooyi appeared to dial back the comment Trump attributed to her.
“My comments were made in that broader context and included a suggestion to explore the harmonization of the European system and the US system of financial reporting,” Nooyi said in a statement.
The CEO has an intimate knowledge of the pressures executives face to make quarterly projections. For five years ended in 2016, PepsiCo was pressured by activist investor Nelson Peltz to boost earnings and separate the snack and beverage businesses.
To be sure, business leaders not under pressure from an activist have also bemoaned “short-termism” — but few, if any, have gone as far as urging less frequent reporting.
JPMorgan Chase Chief Executive Jamie Dimon and Berkshire Hathaway CEO Warren Buffett penned an op-ed in The Wall Street Journal in June in which they urged companies to stop providing quarterly guidance — just one piece of quarterly reporting, and one not even mandated by regulators.
Guidance “often leads to an unhealthy focus on short-term profits at the expense of longterm strategy, growth and sustainability,” they wrote.
But despite their sharp words, the two business giants made it clear that quarterly financial reporting should continue, calling the transparency it brings an “essential aspect of US public markets.”
While Wall Street winced at Trump’s suggestion, parts of the Beltway crowd were delighted.
“I applaud the President’s continued efforts to evaluate the impact and cost of federal regulation on American businesses and entrepreneurs,” Rep. Jeb Hensarling, R-Texas, said in a statement.
Even the Securities and Exchange Commission appeared to agree with the need to reevaluate quarterly reporting to “encourage long-term capital formation.”
“The SEC’s Division of Corporation Finance continues to study public company reporting requirements, including the frequency of reporting,” Chairman Jay Clayton said in a statement Friday.
President Trump credited Indra Nooyi with suggesting a cutback to twice-yearly corporate earnings reports, although the outgoing Pepsi CEO later dialed down her endorsement.