SEC seeks end to quarterly reporting mandate: CEI analysis

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The Securities and Exchange Commission today proposed to end mandatory quarterly reporting for public companies and switch to semiannual reporting.

“The SEC has made the right call in proposing to end mandatory quarterly reporting by publicly traded U.S. companies and giving them the option to report semi-annually instead,” said John Berlau, CEI director of finance policy.

In the lead up to today’s SEC announcement, Berlau discussed the need for this reform. Key points:

  • Ending mandatory quarterly reporting would align the US with the corporate governance rules of the rest of the world, make U.S. firms more globally competitive, and curb the short-termism of US corporate culture decried by both parties.
  • Nearly all of Europe and Asia do not mandate quarterly reporting and instead require less burdensome semi-annual reporting. As co-author Chris Kuiper and I wrote in a  USA Today op-ed, ‘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.’
  • Business leaders like Warren Buffett and progressive politicians like former President Barack Obama have lamented companies forgoing long-term investments in research and development and employee well-being in order to ‘make the quarter.’ Yet many have failed to identify the quarterly reporting requirements that drive this short-termism. The SEC’s proposal addresses the problem at its source and ends the quarterly reporting requirement.
  • Abolishing mandatory quarterly reporting need not shut down the frequent updating of shareholders on events affecting the firm. Public companies should be free to provide information more frequently, provided that the information is accurate. Ending the government mandate for quarterly reporting – while permitting firms to provide shareholders truthful information at all times — would end an archaic regulatory requirement that ill-serves American investors and the U.S. economy.

Related analysis:

Trump’s call to end corporate quarterly reporting mandates would boost competitiveness, end onerous regulation

Racing to make the quarter,” Visalia Times Delta, September 13, 2015