SEC Roundtable to Consider Short-Termism
The Securities and Exchange Commission (SEC) have announced a roundtable to contribute to the ongoing discussion around short-termism in corporate decision making.
An excessive focus on short term results could lead to inefficient capital markets, poor investment returns and economic instability – this much is clear, however, the cause of short-termism in corporate thinking is not always obvious. In December 2018 the SEC requested input into the effects of mandated quarterly reporting, exploring whether disclosure requirements could have been contributing to short-term thinking.
This week the SEC have announced a roundtable, bringing investors, issuers, and other market participants together to further discuss the impact and causes of short -termism. While full details are yet to be released, the potential topics for consideration include:
- The role (if any) of short-termism in the declining number of public companies
- The SEC’s ability to reduce regulatory burden while simultaneously facilitating better disclosure – e.g. by streamlining quarterly disclosures and preventing duplication between quarterly reporting and earnings releases.
- The potential for smaller companies to be given flexibility on their reporting frequency.
- Market practices that could be orientated to encourage longer-term thinking.
In an era of sustained low interest rates, deep pools of innovative and patient private capital, significant transaction costs for those undertaking IPOs, and whiplash markets fuelled by high frequency trading, the Commission should not be surprised that entrepreneurs are relying on a host of alternative ways to raise funding and that financial markets are trying to discover new models for spreading investment risk. Which doesn’t make it any less important to work on ways to enhance public markets and improve structural incentives that have a tendency, today, to encourage a short term horizon for far too many enterprises.
Read more here, where members of the public who wish to participate in the event or submit comments for discussion can also find out more.