Earlier in June, two Wall Street veterans had lambasted the practice of announcing quarterly results, stating it would hinder the long-term goals of companies. Berkshire Hathaway (BRK.A) CEO Warren Buffett and JPMorgan Chase (JPM) chief Jamie Dimon also started an initiative, backed by a few other CEOs, to draft a document of voluntary governance guidelines that make quarterly announcements optional.
On Friday, investors were greeted by President Donald Trump’s tweet that said he has asked the Securities and Exchange Commission (SEC) to study the possibility of transitioning into half-yearly results, instead of quarterly results, for public companies.
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
Trump said, following discussions with “business leaders,” he has come to the conclusion that a shift to half-yearly results would create more employment and enhance business performance.
While on one side such a move would make investment decisions cumbersome, on the other, it would take off the burden that companies have to meet the short-term targets set by analysts. Since stock movements are directly linked to the quarterly performance, executives are often tempted to operate against their long-term goals. Or as Dimon stated, quarterly earnings intrude into the management’s business strategy.
There is also an emerging trend where activist investors are putting pressure on companies to meet earnings expectations.
Meanwhile, many investors are irked by Trump’s move, stating that quarterly results are key to maintaining transparency and accountability in the trading environment. Many investors also expressed hope that the SEC would not give a green signal to such a shift.