Breakingviews: Trump adds new impetus to old short-termism debate

Donald Trump has added new impetus to an old debate about corporate short-termism. The U.S. president took to Twitter on Friday to say that he has asked the Securities and Exchange Commission to study allowing public companies to report earnings every six months, rather than quarterly.

BlackRock Chief Executive Larry Fink had already slammed the practice. JPMorgan’s Jamie Dimon and Warren Buffett earlier this year proposed doing away with quarterly guidance, but not quarterly reporting.

And former Democratic presidential candidate Hillary Clinton derided “quarterly capitalism” in 2015; her solution focused on lowering the capital-gains tax the longer an investment was held. Fink, also a Democrat, has accused companies of being too focused on quarterly results. Such thinking goes that beating estimates four times a year can detract from devising, implementing and defending a longer-term strategy.

Trump joined the discussion by tweeting other reasons routinely given: a corporate leader told him moving to a six-month reporting schedule would allow for “greater flexibility & save money.” He recently entertained the chief executives of Boeing, FedEx, Apple and other companies at his New Jersey golf club.

Eliminating quarterly reports could, however, reduce transparency for investors. Data and comments made by executives in the regular earnings exercise can help shareholders make better decisions earlier. A legitimate analyst question during a May earnings call prompted Tesla Chief Executive Elon Musk to say “boring bonehead questions are not cool.” Brian Johnson of Barclays Capital said Musk’s behavior “should give even the uberbulls pause.” That was months before Musk, without board approval, tweeted last week about taking the electric-car maker private.

Lawmakers had already been considering how to deal with other aspects of short-termism in corporate America. Last year, a bipartisan plan introduced in Congress targeted activist investors like Carl Icahn by proposing to shorten the 10-day disclosure window for revealing a more than 5 percent stake in a company to four days. Earlier this week, Senator Elizabeth Warren, a possible 2020 presidential contender, proposed a bill prohibiting certain company board directors and executives from selling stock within five years of receiving it.

The various views from different stakeholders suggest the value of quarterly reporting, and whether it distracts from long-term focus, are worth further study. Trump’s tweeted directive should finally prompt some useful independent analysis.

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