Pay, Performance, and the Quarter: What the SEC’s Reporting Proposal Means for Boards

For more than 50 years, quarterly reporting has been a defining feature of US public markets. Now, the Securities and Exchange Commission (SEC) is considering whether that cadence should be optional rather than mandatory—allowing companies to report earnings twice a year while retaining annual reporting and real‑time disclosure of material events.

Supporters view the proposal as a long‑overdue modernization. Critics see it as a step that could weaken transparency and investor confidence. As with most governance reforms, the implications are nuanced—and highly dependent on how boards respond.

The Case for Semiannual Reporting

Quarterly financial reporting has long been criticized for reinforcing short‑term performance pressure, particularly when paired with earnings guidance, incentive plan calibration, and activist benchmarks. Proponents argue that fewer mandated reporting cycles could give management teams greater room to invest for the long term—especially in research & development, innovation, and strategic transformation.

In a Financial Times op-ed, SEC Chair Paul Atkins framed the proposal to reduce compliance friction without abandoning investor protections: “The government should provide the minimum effective dose of regulation needed to protect investors while allowing businesses to flourish.”

Preparing quarterly financial statements is costly and time‑consuming. Finance teams point to the cumulative drain of repeated closes, reviews, and investor communications. For smaller and newly public companies in particular, semiannual reporting could free up resources to focus on operating performance rather than reporting mechanics.

Atkins also argued that the SEC should avoid prescribing a one-size-fits-all cadence: “It is time for the SEC to remove its thumb from the scales and allow the market to dictate the optimal reporting frequency based on factors such as the company’s industry, size and investor expectations.”

The US is increasingly an outlier. The UK and EU eliminated mandatory quarterly reporting more than a decade ago, yet many companies in those markets continue to provide interim updates voluntarily. Supporters argue that similar flexibility in the US could preserve transparency while reducing rigidity.

The Case Against It

Quarterly reporting provides investors with consistent, standardized checkpoints to assess performance, execution, and risk. Less frequent mandatory reporting could increase information asymmetry—particularly for retail investors—and make it harder to compare companies within the same industry.

Atkins has pushed back on the idea that a semiannual option would inherently reduce visibility, writing in the FT that “giving companies the option to report semiannually is not a retreat from transparency.”

Evidence from other markets suggests that when companies stop reporting quarterly, analyst coverage can decline and investors may demand a higher risk premium. For smaller or growth‑oriented companies, reduced visibility could translate into a higher cost of capital rather than relief.

Ironically, less frequent reporting may not dampen market volatility. Longer gaps between formal updates can heighten reactions when information finally arrives—and increase reliance on informal signals in the interim. Optional reporting also raises the risk of a two‑tier market, where stronger performers disclose more and weaker performers disclose less.

Why Boards and Compensation Committees Should Care

For boards, the debate is not simply about reporting frequency—it’s about accountability, incentives, and trust. Interim disclosures play a critical role in how investors evaluate:

• Execution against strategy
• Capital allocation discipline
• Alignment between pay and performance

If quarterly financial reporting becomes optional, boards will need to think carefully about how they maintain credibility with investors. That includes clarity around the performance of metrics used in incentive plans, progress against long‑term goals, and the rigor of goal‑setting and payouts.

Importantly, research suggests that reporting cadence alone is unlikely to cure short‑termism. Executive compensation design—performance periods, metric mix, and vesting horizons—remains a far more powerful lever.

What a Balanced Path Forward Could Look Like

A binary choice between quarterly and semiannual reporting misses the opportunity for a more thoughtful middle ground. A hybrid approach—combining optional quarterly financials with required semiannual reporting, robust Form 8‑K disclosures, and meaningful qualitative updates—could reduce mechanical burden without sacrificing investor insight.

For boards, the likely reality is this: even if quarterly reporting becomes optional, most large companies will continue to communicate with the market on a quarterly basis. The differentiator will not be how often companies report, but how clearly they explain performance, risk, and long‑term value creation.

Farient’s Perspective

Efforts to promote long‑term value creation are best advanced not by reducing transparency, but by aligning disclosure, governance, and incentives around durable performance. The SEC has an opportunity to modernize reporting in a way that supports both capital formation and investor trust—and a measured, principles‑based approach will be critical to achieving that balance.