What the SEC Doesn't 'Get' About Earnings

A recent proposal could ease the burden on management... But it comes at a cost...

The U.S. Securities and Exchange Commission ("SEC") is revisiting a long-standing debate...

Should public companies be required to file quarterly earnings reports?

It's not a new idea. Donald Trump first floated the concept of semiannual reporting during his first presidency. Now, he's reviving it with more urgency.

A semiannual schedule would reduce compliance costs for companies. It would also free executives from the constant grind of meeting quarterly expectations.

Even Nasdaq (NDAQ) backed the proposal... saying it would ease burdens on smaller businesses and help management focus on the long term.

But we're not convinced. Less-frequent reporting could make the market less transparent. It could create more volatility. And it could remove one of the most effective tools shareholders have at their disposal...

Executives don't need fewer updates – they need more time...

Supporters of a longer reporting window – including investing legend Warren Buffett and JPMorgan Chase CEO Jamie Dimon – argue quarterly earnings calls force companies to play to the market.

They say CEOs and chief financial officers fixate on hitting short-term targets... rather than executing long-term strategies.

It's a valid concern. But the real culprit of "short termism" isn't how often companies report.

It's how little time leaders have to steer the ship.

According to data from consulting firm Spencer Stuart, CEOs just aren't sticking around as long. The average CEO tenure across S&P 500 Index companies fell from 11.2 years in 2021 to 8.3 years in 2024.

And according to The Conference Board, more CEOs than ever are external hires, which seems to encourage a revolving door approach. Plus, boards are getting more willing to fire CEOs to make a change.

And those short terms put executives in a bind.

They know they have a short runway to make an impact... and to prove their worth to the board. So they front-load results and prioritize quick wins. Sometimes they even defer investments that would only pay off after they're gone.

Semiannual earnings wouldn't change that calculus...

If anything, the idea risks making CEOs even less accountable during those short stints.

Brian Nick, head of portfolio strategy at financial planner NewEdge Wealth, raised another concern. Put simply, fewer updates could increase earnings volatility.

If companies only reported twice a year, the market would be even more surprised by bad earnings. That could mean even more damage than usual.

If the SEC wants to improve these short-term stints, it should focus on incentives and timelines... not just disclosures.

That could include making stock vesting periods longer than the typical three to five years, so executives have a reason to stay around longer.

It could also look like ensuring stock is awarded based on metrics that will benefit the company in the long run.

In other words, management needs the tools, time, and trust to make long-term decisions.

At the end of the day, market trust depends on visibility and accountability...

Quarterly earnings aren't hurting investors... They're actually one of the few defense systems shareholders have.

Lengthening that window won't change the fact that most CEOs feel they're operating on a ticking clock.

And it certainly won't stop executives from chasing short-term wins.

If anything, it could make those pressures worse... by removing the spotlight that keeps leadership behavior in check.

Regards,

Joel Litman
October 22, 2025