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Comment by nickff | Hacker News Reader

The problem with reporting often is that the reports must each be audited (which is time-intensive and expensive), and any errors subject the companies to class-action lawsuits (which only ever benefit the lawyers, but that is a separate matter).

I would also prefer more frequent reports, but only if they were less burdensome and risky.

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The reports don't have to each be audited... reduce the auditing to twice a year, increase reporting to monthly... if your report requires remediation, you her bumped to quarterly audits

The company would probably be sued if there were any issues in one of the monthly reports; the money for the plaintiff lawyers is just too appealing. I think monthly 'informal' reports with some legal protections to allow for inaccuracies and inconsistencies, with biennial 'formal' reports would be wonderful. That said, I think allowing companies to select an appropriate reporting interval might be best.

Feels like a first world problem. If your company cannot afford to output accurate reports every month, maybe it shouldn’t be a company at all.

Do you have any sources to back up your feelings? I’m basing my comments on what I’ve read about the matter from a variety of former public company CEOs, CFOs, and COOs.

I am coming to this from a perspective of a worker who used to get quarterly options of the public company I worked for, and I just cannot for the life of me sympathize with a company complaining that it can only afford to gather the information to calculate the worth of the stocks they are paying me in two times a year. I don‘t care how much it costs them. If you are gonna be paying and trading in stocks, I expect you to do the work required.

I understand your view, and agree that transparency is good, but "the work required" is largely preventing and defending against lawsuits by plaintiff lawyers, and those lawsuits cannot possibly benefit the shareholders (because whether the suit is won, lost, or settled, the money all goes from one pocket to another, with a cut going to the lawyers).

This may sound rough, but I don’t care about shareholders. In fact I consider them my enemy, or at least my class-enemy. Whenever they make money off of the shares of the company I work for, I consider that exploitation, and I want them to stop doing that. I also want them to stop paying me in stocks, and I want my—and my fellow worker’s—pension funds to stop trading in stocks. My shareholders are my exploiters and my enemy and my pension fund should not be my exploiter nor my enemy.

But while we live in this system which forces stocks onto me, and I have no say in the matter, I want it as transparent as possible, and I don‘t care how much it costs my enemies.

Ahhh yes. As we all know regulations and requirements and bureaucracy never have unintended consequences, especially on the little guy. All that matters is intent, right?

The "little guy" isn't a publicly listed company issuing reports. By the time you have an IPO, you're no longer little.

Shouldn't be a public company, at least. You can squander your own money as you like.

Longer periods between audited (aka "accurate") results will lead to compounding errors. Fewer people at the company will have a clear idea of how the company is doing. Audits are like CI for finances.

I agree that would be preferable if reporting were less expensive and (legally) risky, and what you're describing is definitely closer to the original intent of the rule (that of giving investors the information available to management), but it would make being a public company even more burdensome than it already is, and the number of public corporations is already in decline.

how much of that decline is due to mergers vs failing vs new private companies being formed instead?

> it would make being a public company even more burdensome than it already is

Every company doesn't have to be public. The US taxpayer underwrites US securities markets, and companies that trade on our public markets have access to some of the deepest pools of low-cost liquidity in the world. But companies are obviously free to list elsewhere.

> the number of public corporations is already in decline.

Separate problem. IIRC HBS studied this and basically the issue is we stopped enforcing our anti-competition laws a while back[1]. So we end up with a fraction of firms that each sector would financially support. Both because it creates giants that are much harder to compete against, and because it allows mergers between competing firms that AFAIK could be deemed illegal under existing laws.

1 - See, for example the Robinson-Patman Act, whose dormancy allows big box retailers to exist. This law has never been repealed.

When companies stay private longer, private capital stays tied up for longer, decreasing public liquidity and keeping bad private investments afloat for longer. Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees. Right now badly performing companies can limp along tying up liquidity and locking up employee equity only to head to an eventual bankruptcy or bad IPO.

> Part of the creative destruction of the dot com bust was the legion of badly performing companies that went public and were thoroughly rejected by public investors, offering an exit to later investors and employees.

That's not how I remember it. I remember lots of publicly traded company shares being gobbled even though their business plans[1] were essentially:

1. Collect underpants

2. ?

3. Profit

"Going for marketshare" and not making a profit was still popular as recently as Uber/DoorDash/etc. Cisco still (AIUI) hasn't reached back to is DotCom peak.

Are the current multiples of many tech stocks sensible?

[1] https://en.wikipedia.org/wiki/Gnomes_(South_Park)

I'm having a hard time responding to someone who's using a South Park episode as a discussion point. Like how can I debate a point made by a show that makes content reacting to the popular perception of certain ideas? That's like 2 levels removed from the actual true details.

Anyway the difference now is that those companies still exist they just take round after round of private investor capital and the employees are offered shares that will never be tradable. Were those businesses would go bankrupt in a few years before now they can take 5-10 years. Time value of money being a thing, your money will be locked up for longer in a bad investment than it would on the public markets.

> I'm having a hard time responding to someone who's using a South Park episode as a discussion point. Like how can I debate a point made by a show that makes content reacting to the popular perception of certain ideas?

The South Park episode came out in 1998, when the profitability of tech companies was… questionable, but their popularity was very high. It was social commentary on the zeitgeist and group think of the time. And it turned out the irrational exuberance was not justified for the valuations, as everyone learned post-2000.

And have we learned anything since then? What are valuations and P/E multiples now? And it goes back centuries in the past as well, so 'modern tech' is hardly the driving force:

* https://en.wikipedia.org/wiki/Technological_Revolutions_and_...

Your original post stated "the legion of badly performing companies that went public and were thoroughly rejected by public investors". The historical record shows that these companies going public were not "thoroughly rejected".

If you're using South Park and "social commentary on the zeitgeist" as a way to think about markets, I think we're not going to have a productive conversation. A public equity market in the US has a technical definition that I'm using here. You're constructing a narrative out of these things that really makes no sense. When one said that public investors reject an investment, that means they mark the price of the equity down by selling shares for a lower level.

> badly performing companies can limp along tying up liquidity and locking up employee equity

"Just raised a Series E/F/G/H/I" companies

In the us, quarterly financials are not audited, only annual financials

Perhaps the auditing needs to be done on the workflow process and once the automated code is in place there needs to be a traceable chain of modifications to it that need to be justified.

The "audit" certifies a certain hash of a repo that produces known-good results, and if you use a different commit in that repo you have explain in an SEC filing why you modified things.

Basically reproducible builds for financial results:

* https://en.wikipedia.org/wiki/Reproducible_builds

I know a few accountants, and I do not think this is possible. There is an incredible amount of manual adjustments that have to occur to get the books in order. I suspect the official process is 100% GAAP approved and great, but the messy reality has thousands of tweaks that were massaged all over the place to correct for one thing or another.

Yes, I know some accountants as well, as well as bookkeepers who have to do adjustments for things like 'timecards' and punching-in and -out: there's all sorts of adjusting that needs to be made.

But any "mistakes" that are made are simply corrected the next reporting period (whether that's monthly, fortnightly, weekly, or daily) in this more-frequent proposal.

The 'crunches' that occur at quarter/period-end are there because there is so much attention put on those reports because they're so infrequent. If the sampling rate is higher then errors are corrected that much sooner.

The reports are generated on the books in the state that they currently are in on a monthly/fortnightly/weekly/daily basis, and any adjustments will be "fixed" in the next reporting period. The reason why there's so much pressure to get them "correct" now is because of the (relatively) infrequent reporting. If you know that things will be 'sorted out' in a fortnight (two weeks), or whatever, there's less pressure now to get them "right".

There will be an expectation of less perfecttion and more corrections and better 'smoothing' due to the higher 'sampling rate'.

Isn't that the kind of toil that tends to get automated away with CI/CD?

You could report every month and audit every 6 months

I'm generally with the report often camp. It forces automation all the way down even the auditing.

Wouldn't the auditing be proportionally easier with less data in each report?

The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron.

https://www.britannica.com/topic/Sarbanes-Oxley-Act

Like the building and electrical code, these regulations were written in blood.

> The reason for strong auditing and personal attestation is because left to their own devices, some companies will produce bullshit and hoodwink investors. Blame Enron.

Except Enron's results were audited. By (now defunct) Arthur Anderson:

* https://en.wikipedia.org/wiki/Enron_scandal

* https://en.wikipedia.org/wiki/Arthur_Andersen#Collapse

The auditing already existed and didn't stop Enron (or WorldCom; see also the silliness of GE under Jack Welch).

Sure SOx added more rules, but it's not like folks were flying without a net before.

Technically the auditing already existed, but functionally it didn't because Enron could bully Arthur Andersen into getting the results they wanted, or just ignore results they didn't like.

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