“Quarterly capitalism” is a new focus of Hillary Clinton’s presidential campaign that could pick up even more steam with recent market turmoil. “It’s easy to try to cut costs by holding down or decreasing pay and other investments to inflate quarterly stock prices, but I would argue that’s bad for business in the long run,” Clinton said recently at The New School in New York.
Some are saying this might be her way of sounding populist while maintaining support in the business community. But one need not support all of Clinton’s policy prescriptions, such as higher capital gains taxes, to agree with her that public companies racing to “make the quarter” can be a problem.
Yet Clinton and many other American critics of “quarterly capitalism” have so far ignored the proverbial elephant in the room — America’s mandate that public companies produce earnings reports every quarter. This is the rule that makes quarterly reporting a necessity in the U.S. and underlies all the problems that go with it. International comparisons show that quarterly reporting requirements not only tend to decrease long-term investment, but also increase manipulation of the numbers to please shareholders.