Trump Asks SEC To Study How Often Corporations Are Required To Report Earnings

Aug 17, 2018
Originally published on August 27, 2018 4:35 pm
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MARY LOUISE KELLY, HOST:

President Trump wants federal regulators to consider a big change in the way that companies report their earnings to investors. Instead of saying how much they make four times a year the way they do now, they would only have to do so twice. He made the proposal in a tweet early this morning. NPR's Jim Zarroli reports.

JIM ZARROLI, BYLINE: In his tweet, the president said he's asked the Securities and Exchange Commission to see what would happen if companies reported their earnings less frequently. He told reporters later that he got the idea from the leaders of the companies, their CEOs.

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PRESIDENT DONALD TRUMP: And I thought of it. And it made sense to me because, you know, we are not thinking far enough out. We've been accused of that for a long time, this country. So we're looking at that very, very seriously.

ZARROLI: Trump says he wants to consider requiring companies to report their earnings every six months instead of every three. It would ultimately cut back on the amount of paperwork companies have to contend with, but it would also mean investors would get updated less often about how a company is doing. Mike Roe (ph) is a professor at Harvard Law School.

MARK ROE: The problem is if the firm has gone dark for six months instead of three months, the chances of the stock market's expectations being out of line with what really happens increases.

ZARROLI: Investors might want to hear from their companies more often, but Trump is addressing what's viewed as a longstanding problem in corporate America. Critics have long said that having to report every three months means companies don't focus enough on their firm's long-term health. They're constantly having to worry about the expectations of Wall Street investors, who tend to want immediate profits.

In June, the world's most famous investor, Warren Buffett, and JPMorgan Chase chief executive Jamie Dimon together wrote an op-ed in The Wall Street Journal about this focus on immediate gratification. Appearing on CNBC, Buffett criticized the practice of companies giving guidance about future earnings.

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WARREN BUFFETT: It's a very, very bad practice. And once it gets going, it feeds on itself.

ZARROLI: Buffett wants more companies to voluntarily stop giving earnings guidance. But Trump's proposal would go a lot further than that. Amy Borrus is with the Council of Institutional Investors, which advises big investors, such as pension funds.

AMY BORRUS: Investors need timely, accurate financial information on which to make informed investment decisions. You know, it's widely recognized that quarterly reporting adds discipline and accountability for companies. And it helps keep companies honest.

ZARROLI: Harvard Law School professor Mike Roe adds that having to report twice a year instead of quarterly isn't enough to change the culture at most companies. So if the goal is to encourage more long-term thinking by companies, he says, Trump's proposal probably won't accomplish that. Jim Zarroli, NPR News.

[POST-BROADCAST CORRECTION: We incorrectly identify Harvard Law professor Mark Roe as Mike Roe.] Transcript provided by NPR, Copyright NPR.