The Renewed Bid To End Quarterly Earnings Reports (msn.com)
- Reference: 0179109480
- News link: https://news.slashdot.org/story/25/09/09/1535229/the-renewed-bid-to-end-quarterly-earnings-reports
- Source link: https://www.msn.com/en-us/money/companies/the-renewed-bid-to-end-quarterly-earnings-reports/ar-AA1M9pGV
> The Long-Term Stock Exchange plans to petition the Securities and Exchange Commission to [1]eliminate the quarterly earnings report requirement and instead give companies the option to share results twice a year, the group told The Wall Street Journal. It says the idea would save companies millions of dollars and allow executives to focus on long-term goals instead of worrying about hitting quarterly targets or prepping for earnings calls.
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> "We hear a lot about how it's overly burdensome to be a public company," said Bill Harts, the exchange's chief executive officer. "This is an idea whose time has come." President Trump briefly explored the idea during his first term, and current SEC leadership has signaled an interest in reducing regulation.
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> LTSE representatives recently discussed their proposal with SEC officials and left the meeting encouraged, people familiar with the matter said. LTSE is a stock-trading venue for companies focused on long-term goals. Its proposal would apply to all U.S. public companies, not just the few listed on its exchange. The group thinks such a move could revive the shrinking number of public companies, which some see as an existential threat for the American economy and investors.
[1] https://www.msn.com/en-us/money/companies/the-renewed-bid-to-end-quarterly-earnings-reports/ar-AA1M9pGV
No. Long-term or Not, Investors Need to Know (Score:3, Insightful)
The LTSE has neat principles, but their requirements are insufficiently stringent to absolve them of their obligations to fully inform their financial investors. Consider their requirements to list:
1. Serves the interests of a broad group of stakeholders
2. Measures success over long time horizons that stretch from years to decades
3. Implementing compensation plans for executives and directors that reward long term performance
4. Giving directors a crucial role in the setting of strategy and the monitoring of progress
5. Engaging with long term shareholders
Every single one of those requirements is gameable. Consider:
1. Everyone likes to make money. We make money. Check!
2. We evaluate revenue over multiple years. Check!
3. Double-extra bonus for C-suite that's stuck around for 5+ years. Check!
4. Meetings happen. Check!
5. Shareholders calls. Check!
Wow... so innovative. (sarcasm) Their requirements are insufficient to assuage the financial concerns with business operations that instigated the quarterly report standard.
Yes, having accountants costs money. Being responsible stewards of corporate funds is hard. Good accountancy is one of the most important LONG-TERM financial success strategies. You don't want to fly by the seat of your pants, loose millions of dollars in random unaccounted-for accounts, or fraudulently use funds that are restricted as customer deposits as investment capitol, right? RIGHT? (See: FTX)
Ya... that's why quarterly reports are necessary.
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Someone banked for FTX. Someone built all the houses they bought. Someone gave them a massage three times a week. To think that nobody but the rich criminals want the rich criminals to succeed lacks nuance.
Difficult from an investor's perspective (Score:4, Insightful)
I've followed a few companies with semi-annual reports, and it is much harder to track them and can lead to bigger price swings when they report. I appreciate the goal, but it is likely the wrong approach to achieve it.
Internally most companies are still going to do quarterly financial benchmarks and taking that information from the public is likely also going to lead to more insider transactions.
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On the upside, less public information would allow investment firms to generate alpha (see the earlier story ) by using their superior know-how to estimate what the quarterly reports give away for free.
I'm other words, if you think the stock market is too efficient, deregulate!
They want it all (Score:3, Insightful)
Sure, they get money thrown at them when they go public, then they don't want to be held to the standards that will prevent them from having to show what is going on to keep investors from fleeing when there are obvious danger signs. These are the same companies that tend to mislead investors about how poorly they are doing in bad times. Oh, your sales are down by 50% year over year, and you just did a share buyback to keep your stock price high, what could POSSIBLY be wrong with not telling your owners(the stockholders) what's going on every three months?
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I came here to say this. And with the current guy in the White House, I imagine they'll succeed in getting this implemented.
I'll be alright with this so long as the manager of my 401K gives me the option to avoid having any of my money invested in companies that don't release quarterly earnings reports. American companies love bragging about their earnings, so any company that goes out of its way to hide that data should be considered extremely questionable.
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Just how often should these reports be produced to hold these companies responsible? If three months is good then every month is better, right? Why not weekly?
I'm having a recollection of a Friends episode that was something of a parody of this. I'm likely getting it wrong but it was memorable for the toilet humor. Apparently Chandler had a job to produce the ANUS report, Annual Net Untaxed Spending or something. This report was to have every WEENUS and PENUS put inside, which were the Weekly Estimated
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We have quarterly results as the current period for reporting to shareholders what is going on. There is always the issue of there being so much variation from day to day, week to week, and month to month that using very short periods for the reporting ends up being less useful. The base concept of these reports is so these PUBLIC companies will let shareholders know how things are going for the company so the stockholders know what to expect. If you own as much as 10 percent of a company, you'd expec
Like the C-suite can be trusted? (Score:2)
Oversight of some type would be nice.
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Tell that to the guy who was laid off because the company missed its quarterly earnings target.
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You clearly have no idea how complicated the accounting at a large corporation can become.
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Accounting is straight forward. Much of the complexity is due to government regulatory and tax requirements.
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That is certainly true, but once you get involved in providing or buying materials for payment in the future and similar things the complexity increases exponentially. The value of a payment due in 90 days, for example, has to allow for the chance of collecting, the value of money at that time and other complexities. Determining the present value can be arcane. That is why accountants get paid.
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I think you are confusing bookkeeping and accounting.
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>> You clearly have no idea how complicated the accounting at a large corporation can become.
> Accounting is straight forward. Much of the complexity is due to government regulatory and tax requirements.
I'm confused. So you agree that, when all factors are considered, corporate accounting is complicated?
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>>> You clearly have no idea how complicated the accounting at a large corporation can become.
>> Accounting is straight forward. Much of the complexity is due to government regulatory and tax requirements.
> I'm confused. So you agree that, when all factors are considered, corporate accounting is complicated?
If we stipulate that corporate accounting is complicated, why would a 3-month cadence be more challenging than a 6-month cadence? The tools, processes, and people are already in place, so what's the difference?
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> The tools, processes, and people are already in place, so what's the difference?
They aren't more challenging, it just takes time and resources to execute those processes. The argument for moving to a 6 month cadence is that those resources and time would be better expended forwarding the goals of the business rather than preparing an unneeded set of reports. (To be clear, I have no input on whether the quarterly cadence is superfluous or not. I'll leave that conversation up to the finance nerds.)
Well of course. (Score:2)
Remember that in the eyes of the current administration, investors have only one purpose. That is to move money from the private sector into the hands of the company. After that, they can go hang. Come to think of it, that's the purpose of... well, everybody else. They are a capital pool. And once they have no capital, they are no longer a concern. Effectively they cease to exist.
Last time I checked, long term is 3-5 years (Score:2)
Six months will save money, yes, but will not allow the executives to focus on long term goals
A more worthy goal would be to report AND PAY TAXES every 4 months. More steady income for the IRS, less reporting burden for companies.
We can harvest twice, or even thrice a year, and we now have computers to aid the record keeping instead of scribes and abacus...
Yearly taxes are an anachronism from early non-automated agricultural society...
JM2C
YMMV
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Do US companies only pay taxes once a year?
Nope, Wikipedia says quarterly payments.
Higher on the list (Score:3)
Higher on the list of changes IMHO is figuring out the CEO pay thing. It should be structured so that the incentives for the company are aligned with the pay structure and amount. Today it's mostly just casino style win bug and cash out quick.
Off the top of my head I think there should be a generous base salary to satisfy the crowd that thinks CEOs are the bees-knees. then the stock comp or whatever should be geared to pay out at some longer term rate, like 4-5 years before vesting. This would help reduce de facto pump and dump schemes.
So yeah, CEO of Widgets Inc will have to survive on a measly $5 million per year for 4 years until their options start to vest
Also, also, the options pricing needs to be the same for CEO's as it is for all employees. At one big, public, company I worked for the executive comp rules were like 150 pages long and well over 2/3rds of it only dealt with C-suite rules. Needless to say their rules were very different from the rank-file execs (Directors, VP's, etc)
Also also, the comp committees should be replaced with an algorithm. Comp committees are worse than electoral redistricting committees. Just blatantly, unapologetically, corrupt as hell. Both should be solved by an algorithm.
Moving off-topic, but IMHO redistricting should follow these rules
-be contiguous
-have equal populations
-be geographically compact
-preserve city, county, neighborhood, and community of interest boundaries as much as possible
-not favor or discriminate against incumbents, candidates, or parties
(taken from alarm-redist.org with some editing on my part)
CEO salary might include, in no order
-seniority in prev job. i.e. is this your first CEO job
-running avg of net profit i.e. stock price is roulette table, show me the real money
-other stuff with $ metrics. No fake project goals, or environment goals, or HR happiness goals
# corps down not cuased by reporting (Score:2)
Most likely (not an expert) it is caused by buy outs. That is how corps die out.
Buy outs tend to reduce the chance of a new, small company begin created. It leaves the old business working and the new one would have to compete with a larger corporation.
Yes, bankruptcies might also reduce the number, but those tend to leave holes where new companies can grow into.
As for new companies, well, the market since covid has been creating a ton of tiny businesses, not many small ones.
You want more small-medium siz
Libertarian here (Score:2)
Let the market decide. Split the listings into groups: Quarterly reporting. Semi-annually reporting, And trust me, bro. See if investors attach any value to more frequent reporting.
That was expected (Score:1)
> President Trump briefly explored the idea during his first term,
Of course he did!
I don't see it (Score:2)
You need to do it at a minimum monthly to manage the company. Producing the quarterly report is a minor step from there. Not sure I understand the problem and where those added expenses come from.
Don't want quarterly reports? Don't go public. (Score:2)
The solution seems simple enough. With public investors comes accurate financial reporting. This is especially important in an age where government and corporations want you to put your retirement savings into the market.
It's dumb idea driven by the cheap and lazy. Or greed, can't ignore that.
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It's something like 96% of large companies are private in the EU. It's about 87% in the US. A significant difference, but maybe not what most people imagine.
The main difference between EU and US is how capital is raised and somewhat a different cultural around capital between the two.
Publicly funded companies in the US are much easier to run than in the EU, as the regulations are and costs are significantly less for a US company. Access to public capital in the US means that multiple rounds of funding is po
Utterly ridiculous (Score:2)
As an actual investor (tiny sums, personal picks, but anyway), I'd prefer the opposite - enforced increased rate of reporting, say monthly.
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Coming up with plausible lies is a creative process that can be difficult to produce on such a tight schedule. Perhaps AI will solve that problem, it is pretty good at lying right to your face.
The problem is... (Score:2)
...the economic system is totally focused on growth and quarterly earnings. This causes product quality to drop and workers and customers to be treated poorly.
Companies should focus primarily on the product, then the customers, workers and the environment. Once that it done, honest profit will follow.
Unfortunately, changing the reporting rules won't fix the problem
Stop investing (Score:2)
Publicly traded companies are a scam. Unless they can consistently return dividends to shareholders they aren't worth your time. Buying high P/E ratio stock is a game of hot potato. You hope to sell it for a higher value in the near future to someone who is less smart than you are. The dividend yield on high P/E ratio tech stocks is garbage because the shares are so overvalued relative to their practical return.
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Yeah, as an investor, my reaction to this proposal was, oh HELL no.
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Ditto...
0) when it's a burden to report you activities and financials to current and prospective investors you should rethink your raison d'etre.
1) more information, not less, for investors.
2) if your management is chasing quarterly reports they are doing that wrong. Unless your strategy is to attract investors. If your strategy is to deliver long-term success, well, quarterlies don't matter as much.
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> 0) when it's a burden to report you activities and financials to current and prospective investors you should rethink your raison d'etre.
[Raises hand]: When you need more time to get away with shady things?
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Oh; I agree. Hell no, and we should change the mandate to Monthly reporting of significant pro-forma numbers with Quarterly audited statements instead. I don't believe it should be required to host earnings calls more than twice a year, But accountants need to figure out that we are in the digital age now, and real-time data about the health of the business should be a condition to trade on markets.
That should be at the discretion of management if they believe something requires explanation.