Donald Trump’s latest pronouncement will give IROs pause for thought
After DE&I policies, sensible foreign trade policy and the SEC’s ability to enforce regulations, what’s the next thing in Donald Trump’s sights? Why, of course, it’s that scourge of the capital markets, quarterly reporting.
In case you missed his post on the Truth Social social network on Monday, the US president called for an end to a requirement for companies to file a 10-Q with the SEC, citing China’s ability to take a longer view on companies without mandated quarterly reporting.
‘This will save money and allow managers to focus on properly running their companies,’ he wrote, adding: ‘Did you ever hear the statement that ‘China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???’ Not good!!!’
It was an idea that cropped up in his first presidency too, and received a similar level of criticism from market participants.
Chief among them is that the quarterly report is one of few places that companies must disclose any material matters – like government investigations or other legal matters – to investors. While moves to revoke mandatory quarterly updates in the EU and Singapore have been successful, they have other mechanisms for that disclosure.
If one were particularly cynical – certainly not me – then you might think that Trump might be tempted by the prospect of investors having less regular reminders about the impact of his tariffs on companies’ bottom lines.
Ultimately, it would mean investors would be less well-equipped to make decisions though. As the inimitable Brooke Masters wrote in the Financial Times this week: ‘Let’s give investors less information and see if that helps markets distribute capital more efficiently.’
What exactly this means for IR teams – other than, perhaps, a reduction in workload – is unclear, but many former practitioners agree that there are certainly pluses and minuses.
‘The abolition of interim reporting, as is currently being discussed in the US, has both advantages and disadvantages,’ Manuel Taverne, former head of IR at Knaus Tabbert and CEO of consultancy LTM, tells IR Impact.
‘For small companies in particular, it would significantly reduce the amount of work involved and emphasize the long-term nature of business models. It might even increase the attractiveness of a listing. Disadvantages such as lower transparency can be compensated for with traditional IR work.’
Jean-Benoit Roquette, former head of IR at Ubisoft and founder of IR consultancy Balboa Conseil, believes that any reduction in transparency would ultimately be a negative.
‘The thing is, investors have more and more access to real time data,’ he tells IR Impact. ‘There is therefore an increased need for companies to provide context and impact. Cutting back on reporting would imply a declining control of narrative at a time when is it more important than ever.’
It also leaves a question mark over the role of quarterly earnings calls, one of the few opportunities that investors and analysts can quiz bosses over what has just been disclosed. Taking out that regular touch point seems a short-sighted move.
What do you make of the news? Do you think it will come to pass? Let us know your thoughts, either via LinkedIn, or email us on [email protected].
