Jay Clayton rejects Trump tweet calling for less frequent earnings reports

SEC chairman says quarterly reporting isn't likely to change

Oct 11, 2018 @ 4:29 pm

By Bloomberg News

Securities and Exchange Commission chairman Jay Clayton just tapped the brakes on President Donald J. Trump's push to let U.S. companies report earnings less frequently.

"I don't think quarterly reporting is going to change for our top names anytime soon," Mr. Clayton said Thursday at an event hosted by the Bipartisan Policy Center in Washington. "It was good of the president to raise it," he said, adding that it could make sense to ease the requirements for smaller companies.

Mr. Trump urged the SEC to study the issue in an Aug. 17 tweet, asserting that switching public companies to biannual profit reports from quarterly disclosures could cut costs and create jobs. The president's comments mirrored those of business groups, which have long argued that requiring companies to reveal their financial health four times a year fuels Wall Street's misguided obsession with short-term benchmarks.

"The president did touch on a nerve — which is 'Are people running their companies too much for the short term in response to pressures?' " Mr. Clayton said in a brief interview after the event. "We've been hearing that for a while."

Common criticisms of the current system is that quarterly reporting prompts companies to hold back on hiring and spend capital on share buybacks to meet short-term forecasts.

The issue is bipartisan. In 2015, Hillary Clinton decried what she called "quarterly capitalism" as having a negative impact on businesses and the economy. And while the debate has been long-simmering, recent flashpoints have emerged.

For instance, Elon Musk had cited quarterly earnings as a key factor in his desire to take Tesla Inc. private, saying the burden put "enormous pressure" on him to make decisions that could hurt the electric-car company over the long haul. While Musk abandoned the idea of a Tesla buyout in August, the episode triggered an SEC enforcement case over his claim in a tweet that he had secured funding for a deal.

In June, JPMorgan Chase & Co.'s Jamie Dimon and Berkshire Hathaway Inc.'s Warren Buffett urged companies to stop issuing earnings guidance. Dimon and Buffett, in a joint opinion piece published in the Wall Street Journal, said their criticism of forecasts shouldn't be interpreted as opposition to quarterly reporting.

While Mr. Clayton lauded Mr. Trump and others for raising the issue, he said that other factors like activist investing are also behind companies becoming more focused on the short term.

"I would not say the driving factor is quarterly reporting," he said.

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