COMMENT - Trump demands that companies should not focus on the stock market in the short term – and throws the baby out with the bathwater

"Not good!!!" Donald Trump likely struck a chord with many business leaders when he announced this week what he thought about requiring companies to submit quarterly reports.

On his social network Truth Social, the US President proposed that companies listed on an American stock exchange should only be required to report on their business performance every six months instead of every three. This would save money and allow managers to focus on running the company, Trump said.

Incidentally, it would be the largest intervention in American stock market regulations in decades. And, as is occasionally the case with Trump's policies, it would be an overreaction to a problem that doesn't exist on this scale and whose core lies elsewhere.

Admittedly, Trump seems to have a few arguments on his side. The obligation to present quarterly financial figures is often blamed for CEOs' short-term thinking and actions. The suspicion is that in order to look good at the next report, the bosses are avoiding decisions that only pay off in the medium and long term – preferring those that show immediate results, even if the lasting benefits are debatable. This is all done to prop up the stock price with good news.

Now, every company boss should be able to work without constant interruptions – just like their employees. Nevertheless, employees are accountable to the boss, and the boss is accountable to the owners. In a publicly traded company, success is reflected in the share price. The more fragmented the shareholder base, the more difficult it is for individual shareholders to stay informed about the company's current status and recognize warning signs. Unless the company is required to provide regular financial statements.

The fact that Trump himself isn't a big fan of being held accountable for his actions is irrelevant here. Suffice it to emphasize that no one should fear accountability if they have good arguments. A corporate strategy may require short-term sacrifices to pay off in the long run. But then you can expect a well-paid CEO to be able to explain it convincingly.

In Trump's defense, stock market regulations in the US are particularly strict. In the EU and Switzerland, listed companies are only allowed to report semi-annually. Compliance undoubtedly incurs costs. But these objections would have much more weight if the American stock market were suffering from the reporting requirements. The opposite is true.

The US not only has the world's largest financial market, but also the most attractive. Companies prefer to go public in the US. The high degree of transparency enforced by companies contributes to their attractiveness to domestic and international investors. This allows them to compare companies and make decisions based on the most up-to-date information possible.

It's true that frequent financial releases can contribute to price volatility. Investors are human, and people evaluate news based on their expectations. Whether expectations were exceeded or undercut is a constant driver of price. But what would be the alternative? If investors remain in the dark about business performance for an extended period and can only speculate about how recent developments will affect companies, the potential for surprises is no less.

This doesn't mean that every reporting requirement is automatically good. A discussion about which details companies should disclose each quarter in the US is certainly worthwhile. But Trump's latest idea fits into a broader push by his administration to dismantle shareholder rights, which shifts the balance of power in favor of managers. It would be a step in the wrong direction.