'If it ain't broke, don't fix it,' ex-banker says of quarterly earnings

KEY POINTS

• Biannual earnings means less information for shareholders, which is "not a good idea," author and former banker Bill Cohan told CNBC on Friday.
• Best-selling management author and CNBC contributor Suzy Welch was supportive of somehow mitigating the pressures of quarterly reports, but said it's kind of not worthy of discussion.
• "I think it's a moot point whether anybody likes the idea, I don't think the SEC is ever going to go for this," Welch said.

Biannual earnings means less information for shareholders, which is "not a good idea," author and former banker Bill Cohan told CNBC on Friday.

"If it ain't broke don't fix it. How can it possibly be a bad thing for investors, retail investors especially, to have more information about a company on a quarterly basis?" Cohan said on "Power Lunch."

President Donald Trump on Friday advocated for a possible end to the long-used quarterly earnings reports for publicly traded companies, saying it would boost business and in turn help create jobs. He said he spoke with the retiring CEO of PepsiCo, Indra Nooyi, who had mentioned biannual reporting as a way to, in Trump's words, "make it even better."

Opponents of reducing the frequency of earnings reports argue it would cut back on business transparency and accountability.

"Last time I checked, the president was tweeting about how this is the greatest economy ever ... so everything's going great and now we need to make it even better? By having less information for public shareholders? I completely disagree with this," said Cohan, who is also a writer and former investigative journalist.

"This is not a good idea. It's not in a best interest of shareholders, especially retail shareholders who, by the way, own these companies — not the Wall Street firms and not the corporations themselves," he added.

Those who support the proposal, like former Medtronic Chairman and CEO Bill George, say reducing the frequency of earnings reports would allow companies to focus on long-term goals, instead of misleading investors with short-term performance upsets that can cause anxiety.

"I don't think it means less transparency, I think it shifts the focus of transparency to the longer term," George said on "Power Lunch." "Like President Trump says, it will encourage more growth and more focus on growth, and not just this incessant focus on whatever the analysts' expectations are."

George, who is now a professor at Harvard Business School, added: "Today we don't focus on how companies are growing and what the results are, we focus on the expectation. Did you make your number?"

Cohan didn't disagree that there is an excessive focus on earnings and revenue expectations. But he said CEOs are perfectly capable of educating their shareholders to think longer term.

"There are some CEOs, like Jeff Bezos and maybe like Bill George, who are able to educate their shareholders," Cohan said. "You know, obviously Jeff Bezos has educated his shareholders not to be so concerned about quarterly profits and now he's the world's richest man ... so it can work. Just be a bold CEO."

Best-selling management author and CNBC contributor Suzy Welch also proposed a type of middle ground between quarterly and biannual earnings reports, arguing quarterly reports put undue pressure on companies to show short-term results. But she also emphasized she doesn't like the idea of "there not being any reporting except for every six months."

"There would have to be some kind of hybrid system where in the middle of that there would be an earnings call with some general direction given," Welch said Friday on "Power Lunch." "It would remove managing to earnings, which is very hard on many businesses and it doesn't always bring out the best behaviors."

Despite that Welch was supportive of somehow mitigating the pressures of quarterly reports, she said the idea came out of left field and "is yet another classic Trump 'let me throw a firebomb' kind of idea."

"I think it's a moot point whether anybody likes the idea, I don't think the SEC is ever going to go for this," Welch said.

The White House did not immediately respond to CNBC's request for comment.