The financial world is all abuzz—and honestly, who can blame them?—after SEC Chairman Paul Atkins confirmed Friday what many insiders had suspected for weeks: the agency is seriously considering President Trump's proposal to kill quarterly earnings reports.
"Prioritizing this proposal to further eliminate unnecessary regulatory burdens on companies," Atkins told CNBC's "Squawk Box" in that careful, measured tone that regulatory chiefs adopt when they're about to upend an entire system.
Let's face it, there's something almost poetic about potentially dismantling the quarterly reporting cycle. That frenzied ritual where executives sweat through their Brooks Brothers suits while analysts dissect their every syllable? It might soon be headed for the financial history books.
I've sat through enough earnings calls to recognize the absurdity of it all. The carefully rehearsed statements. The awkward pauses when an analyst asks about that one metric the company was hoping nobody would notice. The verbal gymnastics CFOs perform to avoid using phrases like "we missed our targets."
Truth is, there's a legitimate debate worth having here.
On one hand, quarterly reporting creates a kind of fiscal discipline. It forces companies to keep their houses in order, to face the music regularly. As one portfolio manager told me at a conference last year, "Without quarterly check-ins, some of these CEOs would run their companies like personal fiefdoms." Hard to argue with that.
But here's the flip side—and it's a doozy. The quarterly system has created a monster of short-termism that eats long-term planning for breakfast. I once interviewed a tech CEO (who shall remain nameless) who admitted they delayed an essential software overhaul by two quarters simply because the temporary dip in margins would've spooked investors. Two years later, their outdated systems cost them a major client.
That's the real cost of quarterly theater.
Europeans seem to manage just fine with their semi-annual system. Their markets haven't imploded. Their investors haven't fled en masse. And perhaps—just perhaps—their executives can occasionally think beyond the next 90 days.
Now, the politics of this can't be ignored (can anything these days?). With Republicans holding a comfortable 3-1 voting majority at the SEC, plus one vacant seat, this proposal has a clear runway. We're potentially witnessing one of the most significant changes to corporate disclosure requirements in decades—happening not through Congress but through administrative action.
Talk about regulatory power.
The irony isn't lost on me that many of Trump's staunchest business supporters have built entire careers around the quarterly earnings machine. Investment analysts who pride themselves on forecasting EPS down to the penny. Traders who make their living on post-earnings volatility. IR departments specialized in the dark arts of expectations management. They're all facing a disruption to their professional existence.
(And yes, I recognize the irony of using "disruption" to describe something happening to the financial industry rather than by it.)
But will semi-annual reporting actually solve the short-termism problem? I'm skeptical. Companies will still face the fundamental tension between pleasing investors today and building value for tomorrow. They'll just have six months instead of three to play their accounting games.
"Let's frontload all our bad news in H1, then show a miraculous recovery in H2!" I can hear the planning meetings already.
What matters most—frequency or quality? That's the question we should be asking. Whether it's quarterly or semi-annual, investors deserve accurate, meaningful information rather than carefully crafted narratives designed to obfuscate as much as they reveal.
As this proposal winds its way through the regulatory process, I'll be watching closely. The dance between corporate America and Wall Street is about to learn some new steps. Whether everyone ends up with sore feet or a standing ovation remains to be seen.
