SEC to seek end to quarterly reporting mandate: CEI analysis

The Securities and Exchange Commission will propose to end mandatory quarterly reporting for public companies, and give companies the option to file semi-annually instead, according to reporting by the Wall Street Journal. That would be a good move for investors, entrepreneurs, and the economy, predicts John Berlau, CEI director of finance policy.

“Ending mandatory quarterly reporting would align the US with the corporate governance rules of the rest of the world, make US 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, just as the SEC will likely propose. 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.’

“In his post, Trump decried U.S. corporate leaders running companies ‘on a quarterly basis,’ and he is far from the only one who has expressed this view. Business leaders like Warren Buffet and progressive political leaders like 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. Hopefully, the SEC’s forthcoming proposal will address the problem at its source and end 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:

John Berlau and Chris Kuiper, “Racing to make the quarter,” Visalia Times Delta, September 13, 2015