Securities and Exchange Commission Chairman Jay Clayton said today he doesn’t want to wake up 10 years from now and find the ability of the public to invest in corporate America has shrunk from 70 percent of the economy to 30 percent,
“That would really bother me,” Clayton told an SEC round table that zeroed in on complaints a short-term focus has surged in public companies while a long-term emphasis has waned to the detriment of retail investors,
The regulator’s chief said the cost of SEC-mandated short-term, quarterly reports has discouraged companies from going public.
As the drift of high corporate performance to private markets has consequences to retail investors, Clayton claimed.
He noted the money private companies spend on disclosures to their investors is “a lot less” than public companies do.
Clayton asserted disclosure requirements affect the way companies do business.
At the same time, he said the greater increase frequent corporate disclosure in the last 20 years has been a positive thing.
Vanguard former Chairman and CEO Bill McNabb said during the session there is a strong move to long term incentives for public company executives
“Market forces have begun to push back,” said the former Vanguard chief.
Fidelity is strongly encouraging companies to set long term incentives. Fidelity Equity Division Co-Head Tim Cohen told the forum.
Uber stayed private for 10 years to avoid the short-term pressures of being a public company, company deputy corporate secretary Keir Gumbs explained.
Even as a public company, Uber is focusing its investor communications on the long-term, Gumbs said, noting that some of its past initiatives, such as Uber Eats, took year to realize, as will future plans, such as self-driving cars.
He said Uber doesn’t expect to be profitable for a couple of years.
During the session, Sarah Williamson, chief executive officer for FCLTGlobal, a think tank promoting long-term decision making in business, said research has shown long-term oriented companies significantly perform better than firms with a short-term outlook..
She acknowledged long-term oriented companies were hit by investors in the financial crisis. However, Williamson said they outperformed their short-term peers in the recovery.
The European Union has shifted from quarterly to semi-annual reports, Nasdaq Chief Regulatory Officer John Zecca told the hearing.
“It’s a significant movement. The justification is the impact on small and medium sized companies. We agree with that” said the Nasdaq official.
Speaking to another hot button issue, CalPERS Sustainable Investments Director Don Pontes said it is critical for companies to disclose their ESG (environmental, social, and governance) risks.
“It insures a company’s management and board have a long term strategic vision,” said Pontes.
