Why Quarterly Reporting from Business Makes Sense
By Michael Posner
Though quarterly reporting may reinforce the short-term mentality of many on Wall Street, an approach that leads companies to maximize near-term profit at the expense of long-term value, simply extending reporting from three to six months won’t change this orientation.
Though quarterly reporting may reinforce the short-term mentality of many on Wall Street, an approach that leads companies to maximize near-term profit at the expense of long-term value, simply extending reporting from three to six months won’t change this orientation. Just last month, Jamie Dimon and Warren Buffett called for the end of quarterly earnings forecasts, but stressed that this “should not be misconstrued as opposition to quarterly and annual reporting.” The pair emphasized that “[tr]ansparency about financial and operating results is an essential aspect of U.S. public markets.” Similarly, FCLTGlobal, a non-profit that began as a joint initiative of BlackRock, McKinsey, the Canadian Pension Plan Investment Fund and others to encourage more long-term thinking in finance, stated in a report last year that “[q]uarterly earnings remains essential in providing investors with the transparency they need and in keeping management teams accountable for their performance.” The group suggested that instead of reducing reporting requirements, companies should be encouraged to incorporate long-term goals in their public reporting and to discuss the progress they are making toward these goals each quarter.
What the president’s proposal will do is reduce transparency and deny investors, government regulators and the public essential information about a range of topics that are in the public’s interest to know. These quarterly reports, called 10-Q filings, are divided into two parts. The first part includes financial statements, disclosures about market risks, analysis of the company’s financial situation by management and discussion of its internal controls. These disclosures give individual and institutional investors the information they need to make informed investment decisions.
Read the full Forbes article.
Michael Posner is a Professor of Business and Society and Director of the NYU Stern Center for Business and Human Rights.