The JUST Report: Benefits and Risks of Dropping Quarterly Earnings Calls
President Trump’s proposal to eliminate quarterly earnings reports touches on a fundamental issue for many interested in the future of capitalism: how to embrace longer-term thinking while providing sufficient transparency (especially for retail investors), performance discipline, and market accountability.
The evidence for taking a more long-term perspective is powerful. According to FCLT Global, 90% of executives agree longer time horizons would improve performance, and companies able to do so outstrip competitors in revenue, earnings, and job creation. Business Roundtable has consistently emphasized that long-term thinking is essential for superior business performance and sustainable value creation. Warren Buffett and Jamie Dimon have also argued that quarterly pressures create “an unhealthy focus on short-term profits at the expense of long-term strategy, growth and sustainability.”
One factor to keep in mind is that public demands for more corporate transparency are going up, not down. Our polling shows “communicates honestly and transparently” has risen to become a top 5 issue for the majority of Americans regardless of demographic or political association. In today’s low-trust environment, reducing reporting could backfire.
One solution may be to change what is reported. In their 2018 op-ed, Buffett and Dimon argued that earnings reports should continue as they “support being open with shareholders about actual financial and operational metrics.” What they proposed to eliminate was forecasting or guidance on future quarterly earnings. Doing so would “strengthen the U.S. economy, benefit America’s workers, shareholders and investors, and leave a generational legacy we can be proud of.”
What if we expanded that concept to report more holistically on other forms of stakeholder value creation, such as performance on workforce training; well-being and human capital advancement; investments in local communities and suppliers; improvements in customer satisfaction and privacy protections; progress on AI safety? Could be a win-win for long-term thinkers and transparency advocates alike.
Be well,
Martin
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JUST AI
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