Is It Time to Ditch Quarterly Reporting?

The CEO was wrapping up her monthly call with the investor-relations team, asking them how prep for the Q3 earnings was going, when the CFO subtly reminded her: Reporting isn’t quarterly anymore. Then the CEO woke up from her dream.

For many US leaders, joining most of the world’s companies in issuing semiannual financial reports would be a blessing. And indeed, the U.S. Securities and Exchange Commission is “prioritizing” looking into that proposal. But while it could finally give companies more leeway to work on longer-term plans, as well as reduce the pressure to halt operations midstream to prepare for earnings calls, some point out the quarterly system—first adopted in the US more than 50 years ago—has its advantages, particularly in managing stakeholders.

While it’s not the first time such a proposal has been floated, the idea this time around comes during a period when boards and executives are facing more pressure and uncertainty than ever before. Between a record number of activist battles, market volatility, AI pressure, and geopolitical turmoil, many of America’s executives would likely welcome taking some work off their plates. At the same time, there’s a general view that companies are too focused on short-term targets and results precisely because they have to report on them so often. “There’s this vicious cycle of quarterly earnings that’s almost like being in Las Vegas,” says Anthony Goodman, leader of Korn Ferry’s North American Board Effectiveness practice. “We’ve created a gambling environment for parts of the investor community.”

The SEC began requiring semiannual reporting in 1955. In 1970, it asked instead for quarterly reporting, as a way to prevent companies from concealing subpar performance during the post-World War II era. As the reporting policy has evolved since then, some market watchers and board-effectiveness experts say the burden on companies to report four times a year has gotten to be too much. “Quarterlies create this artificial time-constrained scorecard that’s a better reflection of recent results than actual longer-term value creation,” says David Wise, vice chairman of rewards at Korn Ferry. “If you think about major organizational initiatives, how much game-changing progress really happens in a three-month period?”

About a decade ago, markets in Europe reduced reporting requirements to twice a year, and a Goldman Sachs analysis of that switch found that reporting frequency had no impact on valuations or returns on equity. Public firms in other parts of the world, such as Singapore, report semiannually too. “This proposal could stop the treadmill for public companies and get people to focus on long-term thinking,” Goodman says.

But critics of longer reporting periods say that a reduction in transparency could fuel rumor mills in terms of a company’s health and create more volatility in the stock market. While larger institutional investors can always arrange calls with a company’s investor-relations team, individual investors don’t have that luxury. “If a company has one bad quarter and then one good quarter, it’s going to be difficult to determine trends, because that six-month report will be mediocre,” says Claudia Pici Morris, CEO and board succession solutions leader for North America. “With fewer data points for investors to rely on, it may be harder to understand a company’s capabilities.” In addition, experts say the longer reporting periods could fuel more activism, because activists will want to understand company performance between disclosures, potentially leading to a slew of 8K filings.

Whether or not the proposal goes through, some experts think organizations may continue to report quarterly because it allows them to tell—and control—their own narrative. “To tell your story to the street, to investors, and to financial media is a position of power,” says Peter McDermott, senior client partner in Korn Ferry’s Global Corporate Affairs and Investor Relations practice. “We could see smart organizations continue to report quarterly so they can guide the message.”

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