Morningstar CEO: I agree with the SEC on ending quarterly reporting—with conditions

The SEC is weighing one of the most significant changes to public company disclosure in decades: moving mandatory reporting from quarterly to semiannual. At Morningstar, we’ve effectively been running that experiment for more than 20 years. We’ve never hosted a quarterly earnings call — not once since our Dutch auction IPO in 2005. So when I say this reform is worth making, I’m not speaking theoretically.

The U.S. public markets are world-class. They force companies to operate in the open and make them easier and cheaper for everyday Americans to invest in. The disclosure rules and continuous oversight mean investors get timely, comparable information. As a result, capital is priced better, misconduct is harder to hide, and investment fees are lower. We need more, not fewer, companies to opt in to public markets.

Every quarter, public companies devote enormous resources to preparing 10-Qs, auditor reviews, Sarbanes-Oxley certification procedures, SEC filings, and earnings calls. For many companies, an annual audit and annual SOX compliance process should provide sufficient investor protection when continuous disclosure is timely and enforced. The cost of doing all this four times per year instead of twice is real, and it falls hardest on the smaller, younger companies shaping the economy’s future. For a small software firm, quarterlies mean handling auditor reviews, SOX certification, and filing work before you’ve even shipped the next product release. That’s another incentive to stay private, raise another round of venture capital, and avoid the treadmill altogether.

That pattern is already apparent. The number of........

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