End Quarterly Reporting? Here are Implications for Pay

The SEC is prioritizing a proposal from President Trump to reduce the frequency of corporate earnings from quarterly to every six months, reports Bloomberg.

The agency has already signaled its appetite to simplify executive compensation disclosure and framed biannual earnings as another way to “further eliminate unnecessary regulatory burdens on companies.”

Why it Matters: Not surprisingly, reactions are mixed. Many CEOs cheer the idea, arguing that quarterly reporting fuels short-termism and distracts management from building long-term value. On the other hand, critics worry that fewer updates mean less transparency for investors, who rely on consistent reporting to keep companies accountable.

Potential Pay Implications: Moving to semiannual reporting could also reshape how boards design and oversee executive pay programs.

1. Longer Performance Periods and Targets
 Most long-term incentives today take the form of performance share units (PSUs) over a three-year horizon. But is three years truly “long-term”?

• With less frequent reporting, plans may shift toward fewer—but more meaningful—milestones.
• Boards will need to consider how short-term incentive plans fit within the overall pay package if executives’ equity payouts are stretched over longer timeframes.

2. Rethinking Payout Curves
 If reporting periods are longer, payout curves may need to be recalibrated.

• Smoother curves or different inflection points could better capture performance without extreme swings.
• Forecasting stretch goals becomes trickier if financial checkpoints are fewer and farther apart.

3. Insider Trading Policies
 Companies would also need to revisit insider trading policies. With fewer public disclosures, executives may possess material non-public information for longer stretches of time.

• Executives already face strict trading restrictions and often have significant personal wealth tied up in company stock.
• Boards will need to carefully balance the length of trading windows—ensuring opportunities remain fair for executives while minimizing the risk of trades that could be seen as leveraging undisclosed, material information.

A Global Perspective: President Trump pointed to China as an example of a more “efficient and cost-effective” reporting system. Meanwhile, European companies are only required to report every six months. Still, many voluntarily stick with quarterly updates to meet U.S. investor expectations and avoid being perceived as less transparent than their peers.

The Bottom Line: Whether this proposal gains traction or not, it raises important questions. Less frequent reporting could ease the pressure of quarterly earnings chases—but it also challenges boards to rethink how they set, measure, and reward performance.