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In a tweet Friday morning, President Donald Trump floated the idea of allowing companies to report their results just twice a year as opposed to quarterly. Trump asserted that such a change would “allow greater flexibility & save money.”
Experts in corporate governance were skeptical.
“I don’t think this solution solves anything very much,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
Given the president’s business background, Elson pointed out that Trump has firsthand experience with the expenses associated with quarterly filing requirements as well as pressure from investors, but he wasn’t convinced that switching from four times to twice a year would solve the problem of investors fixating on short-term performance.
While investors in a handful of companies — Amazon and Tesla, for instance — have been willing to tolerate poor quarterly earnings in return for the expectation of better long-term performance, these are outliers, Elson said.
“I don’t think necessarily this is going to change anything, because then people will manage to six months,” he said. “The issue isn’t how often you report it, the issue is, are the analysts too short-term in their expectations, leading to quarterly issues?”
In an op-ed in The Wall Street Journal this summer, Warren Buffett and JPMorgan Chase CEO Jamie Dimon floated one possible solution. They did not endorse eliminating or reducing quarterly reporting, but instead suggested that public companies stop making predictions for future earnings, writing, “Quarterly earnings guidance often leads to an unhealthy focus on short-term profits.”
There’s also the fact that quarterly accounting is a bedrock tenet of corporate financial infrastructure, and changing that with the stroke of a pen might not be feasible in any case, Elson said. “The regulator can say six months, but if the street demands quarterly numbers, you’re going to get quarterly numbers,” he said.