Quarterly Reporting – What’s Next?

Earlier this week, the SEC published a release requesting comment on the quarterly reporting system.  The release is thoughtful and concise, but it mostly asks questions, so it provides little indication of what action the agency might consider taking.

Two major flaws are regularly attributed to the reporting practices of public companies: complexity and short-termism.  The release engages with these criticisms, but we doubt this is the start of a process that will eventually result in significant regulatory change.

• The complexity point has been voiced repeatedly by investors and by reporting companies, although they speak from very different perspectives. It has also been taken up by Congress in the JOBS Act (2012) and the FAST Act (2015).  The SEC has addressed it in a series of initiatives over the last decade, only partly at congressional direction, and these have resulted in salutary but minor tweaks to its reporting requirements.
• The short-termism point is voiced regularly by business leaders and even, on a few memorable occasions, by the President. It is a recurring theme in battles between management and activist investors, in controversies over management compensation, and in laments over the decline in IPOs and in the number of public companies.

This article was republished by Harvard Law School Forum on Corporate Governance and Financial Regulation on January 11, 2019.