JD Foster: Trump Is Right In Calling For The End To Quarterly Reporting

Sometimes, it’s the little things. Sometimes, it’s bigger things. This time it’s the quarterly earnings report required by law of America’s publicly traded companies. And it’s President Trump suggesting on Truth Social that we should do away with quarterly earnings statements in favor of bi-annual statements. He’s right.

The Securities and Exchange Commission (SEC) requires publicly traded companies to report their earnings quarterly. In contrast, the hyper-regulative European Union and United Kingdom require six-month reporting, though corporations are allowed to make quarterly statements if they want.

Quarterly reporting is just one of the hundreds of rules U.S. publicly traded companies face that privately held companies don’t. Nearly all of these rules make some sense in isolation, but collectively they represent an enormous burden, one effect of which is that even as the American economy has grown steadily over the years, the number of publicly traded companies had fallen by half. Houston, we have a problem.

Quarterly reporting is expensive to the corporation and a major time burden for senior management. These are relative nuisances.

The big problem with quarterly reporting is it imposes a long-derided short-term focus on senior management. Successful businesses plan over a long-time horizon while quarterly reporting is necessarily short-term. As Trump queried, “Did you ever hear the statement that, ‘China has a 50- to 100-year focus on management of a company whereas we run our companies on a quarterly basis?’. Not good!”

As with most policy issues, there are trade-offs. The argument for quarterly reports is that investors/owners should have the most recent information on which to make decisions about share pricing and management quality. Hard to argue with that, so then how about weekly reports? There’s nothing sacred about reporting quarterly.