President Trump speaks during a Cabinet meeting at the White House on Aug. 16. (Andrew Harnik/AP)
August 17 at 10:10 AM
President Trump on Friday called on financial regulators to consider allowing public companies to share information with the public less often, a potentially major shake-up of corporate America.
“That would allow greater flexibility & save money,” Trump said in a tweet.
Publicly traded companies must file quarterly reports disclosing extensive details about their operations, including profit and revenue. But some chief executives have complained that such requirements lead them to focus on short-term profits rather than the long-term health of their companies.
In his tweet, Trump said that the Securities and Exchange Commission should study moving the reporting requirement to every six months instead of every three. The proposal follows conversations with the “world’s top business leaders” about how to “make business (jobs) even better in the U.S.,” Trump said.
In speaking with some of the world’s top business leaders I asked what it is that would make business (jobs) even better in the U.S. “Stop quarterly reporting & go to a six month system,” said one. That would allow greater flexibility & save money. I have asked the SEC to study!
— Donald J. Trump (@realDonaldTrump) August 17, 2018
The SEC, which is an independent regulator, did not immediately respond to a request for comment.
The proposal is likely to be lambasted by shareholder advocates, who in recent years have called on corporations to share more information with the public, not less.
Sen. Elizabeth Warren (D-Mass.) has proposed forcing companies with more than $1 billion in annual revenue to weigh the interests of all stakeholders — including workers and local communities, in addition to shareholders — in their decision-making. Under the proposal, workers would elect 40 percent of the directors, and three-fourths of directors and shareholders would need to sign off on political expenditures.
The proposals offer drastically different approaches to addressing corporations’ reliance on reaching short-term goals to satisfy investors.
Trump “was a CEO, and managers are never wild about the constant reporting. It’s a lot of work to report every three months,” said Charles Elson, director of the Weinberg Center for Corporate Governance at the University of Delaware.
Trump’s proposal would require an overhaul of the basic accounting system used by companies since the Great Depression, corporate governance experts say. The quarterly reports provide important insight into a company’s potential trouble spots and force its executives to address shareholders’ concerns, they say.
“Our whole accounting system is based around the quarter,” Elson said.
If a company struggles to meet quarterly profit expectations or executives feel pressured to manipulate results to reach Wall Street expectations, that reflects poor management and communication, Elson said.
“It is not the fact that you report quarterly that is the problem; it’s a bad management team,” he said. “Changing the reporting period is not going to change that.”