Donald Trump has proposed a significant change to the way companies report their earnings, suggesting a move from quarterly to semiannual reports. This recommendation is to help reduce the cost and administrative burden on businesses. As of this writing, it awaits approval by the Securities and Exchange Commission (SEC).
Trump argues that adopting semiannual reporting could help companies “save money, and allow managers to focus on properly running their companies.” By reducing the frequency of these reports, he believes executives would have more time to concentrate on long-term strategies rather than navigating the pressures of quarterly earnings announcements.
Current rules in the U.S. require that publicly traded companies report their profits at least every three months. By comparison, both the United Kingdom and the European Union allow companies to submit reports every six months. They provide for companies to be able to choose to disclose quarterly if they wish. This established framework begs the question of whether a similar approach could be useful for American businesses.
The conversation about how often companies should report earnings is not a new debate. In 2018, Warren Buffett and Jamie Dimon advocated for the elimination of quarterly guidance in an op-ed published in the Wall Street Journal. The administration’s critics claimed that requiring quarterly reporting encourages myopic short termism behavior by corporate managers that stifles long-term development and innovation.
Besides Trump’s proposal, Norway’s sovereign wealth fund recently advocated for moving in the direction of semiannual reporting too. This pilot program is intended to incentivize businesses to prioritize long-term goals over immediate financial performance.
Chinese companies must file quarterly as well as annual reports, showing just how strict the reporting requirements are. Trump explained that this disparity in how often you report leads to a dramatically different corporate culture. He emphasized this point by stating, “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!!!’”
Providing financial forecasts is now optional under prevailing federal rules. The imperative to deliver on quarterly earnings promises usually drives companies to prioritize short-term results instead. Critics point to the impact of this environment as one that ultimately kills both innovation and strategic long-term planning.
The ongoing debate about the efficacy of quarterly earnings reports continues to evoke varied opinions among business leaders and policymakers. As discussions progress, Trump’s proposal may catalyze a larger reevaluation of corporate reporting practices in the United States and beyond.