In a potentially significant step for public companies and the U.S. economy, the SEC today [December 18, 2018] launched a formal comment process aimed at optimizing the periodic reporting system for U.S. companies. The SEC’s review is wide-ranging, reaching whether reforms could and should be made to discourage quarterly forward-looking earnings guidance, the reasons for quarterly earnings releases and their content, whether Form 10-Qs are useful or overly burdensome or duplicative, the possibility of moving to mandatory or optional semi-annual reporting for all or some reporting companies, the degree to which the frequency of reporting and guidance may lead managers to focus on short-term results to the detriment of long-term performance, the identification of other factors that may promote short-termism and whether there are relevant learnings from other markets where companies can report on a six-month or other schedule.
Posted by Sabastian V. Niles, Wachtell, Lipton, Rosen & Katz, on Saturday, December 22, 2018
Editor's Note: Sabastian V. Niles is a partner at Wachtell, Lipton, Rosen & Katz, focusing on rapid response shareholder activism and preparedness, takeover defense and corporate governance. This post is based on a Wachtell Lipton memorandum by Mr. Niles. Related research from the Program on Corporate Governance includes The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here) and Stock Market Short-Termism’s Impact by Mark Roe (discussed on the Forum here).