Semiannual reporting, we hardly knew ye.
You remember, of course, that in August, the president, on his way out of town for the weekend, threw out to reporters the idea of eliminating quarterly reporting and moving instead to semiannual reporting. (See this PubCo post.) The argument was that the change would not only save time and money, but would also help to deter “short-termism,” as companies would not need to manage their businesses to meet quarterly analyst expectations at the expense of longer term thinking.
A lot of folks chimed in—both pro and con. Business groups contended that the pressure of quarterly reporting was one of the deterrents to going public and maintaining public company status and, as a result, advocated for a change in the periodic reporting system. On the other hand, some contended that a change to semiannual reporting would not really have much effect on short-termism. That is, why wouldn’t the same CFOs who would sacrifice long-term value to make their quarterly earnings targets also make the same sacrifice to achieve their semiannual earnings targets? As one investment strategist quoted in this Reuters article characterized the concept, it’s a “cockamamie idea. For starters, what’s the difference between six and three months? … Either way we’re talking about a very short-term period.” In any event, no one disagreed that a change from quarterly to semiannual reporting would entail a significant overhaul of the current system, which has been in place for over fifty years.
In response to the president’s comment at the time, SEC Chair Jay Clayton had promptly issued a statement indicating that long-term investing was a key consideration for many market participants and that “Corp Fin continues to study public company reporting requirements, including the frequency of reporting. As always, the SEC welcomes input from companies, investors, and other market participants as our staff considers these important matters.” Whether that statement was intended to signal an opening was not entirely clear.
Now, Bloomberg BNA is reporting that, at an October 11 event hosted by the Bipartisan Policy Center in Washington, Clayton just called a halt to speculation on the topic (except, perhaps, for a remote chance for smaller companies):
“‘I don’t think quarterly reporting is going to change for our top names anytime soon,’ Clayton said. ‘It was good of the president to raise it,’ he said, adding that it could make sense to ease the requirements for smaller companies…. ‘The president did touch on a nerve—which is ‘Are people running their companies too much for the short term in response to pressures?’’ Clayton said in a brief interview after the event. ‘We’ve been hearing that for a while.’…While Clayton lauded Trump and others for raising the issue, he said that other factors like activist investing are also behind companies becoming more focused on the short term. ‘I would not say the driving factor is quarterly reporting,’ he said.”