The future of corporate America under Trump

0:00I'm Hugh MacArthur, chairman of Bain & Company's Global Private Equity Practice and host of Dry Powder, a podcast where I sit down with some of private equity's leading investors, such as TPG's Jim Coulter. Somehow the industry keeps growing. KKR's Pete Stavros. Driving operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today.

0:33U.S. President Donald Trump is quickly reshaping the corporate landscape. On Monday, he said companies should no longer have to report their earnings each quarter. And it hasn't stopped there. The administration has also helped companies ward off shareholder activists and class action lawsuits. And if this plays out the way he wants, it's going to be good news for CEOs and bad news for investors and workers.

1:03This is Swamp Notes, the weekly podcast from the Financial Times, where we talk about all the things happening in U.S. politics, finance and the economy. I'm Mark Filippino. And this week we're asking, what's Trump's endgame in corporate America? Here with me to discuss is Rana Faruhar. She's the FT's global business columnist, and she also co-writes our Swamp Notes newsletter. Welcome back, Rana. Hey, thanks for having me. And we've also got Sujit Indap, the FT's Wall Street editor. Good to have you back too, Sujit. Thanks for having me. Okay, so just to put this into context, because I think this is important.

1:34The Securities and Exchange Commission has been mandating that companies report quarterly earnings four times a year since 1970. Trump's Truth Social post on Monday wants to undo all that. He also called for this to happen in his first term. Just, you know, putting that out there. Sujit, how big of a deal is this? It's a pretty big deal, right? Because the quarterly earnings schedule regime is just a staple of public company life. We're all used to as reporters and investors out there of getting that quarterly result, having the call with the CEO, learning about the company, hear them talk about the industry, drives the news agenda.

2:10And it's for investors, information is the lifeblood of what they do. They're all trying to get an edge from public information. And with less of it, there's going to be just more ambiguity. And it could ultimately hurt companies, I think, just because the cost of capital could go up if it's riskier to invest in public securities with less information. You know, I find this so interesting because like so many things that Trump does, it's this weird jujitsu where he's touching on something that some of us that are more on the left and have been concerned about the way in which quarterly capitalism has created short term pressure in the markets have been saying, you know, for a while, maybe we need to rethink the way reporting is done.

2:56Maybe we need to focus a little more holistically on how companies can best make decisions that would be in their long-term interest. But of course, I don't think that's at all what Trump cares about. Yeah, what is this argument, Rana? You know, I haven't really heard an incredibly coherent argument. There is a larger argument that Trump is simply trying to have a greater hand in how businesses do things. If you look at what the kind of logical market argument would be, companies don't want to go public as much as they used to in the past. They want to stay private. And a lot of them feel that's because there are too many reporting rules.

3:36It's too onerous. Their hands are tied. There are too many interest groups that they have to respond to in public filings. You know, I can imagine that that's probably part of what Trump would be capitalizing on. Again, I don't think he's really thinking about anything but power here. There's also the argument that perhaps Trump is pushing for less data out there if the economy is bad. Sort of what's kind of happening at the Bureau of Labor Statistics. He fired the head of the BLS a few weeks ago at this point. Is there also an argument that this is potentially just trying to make it less transparent in the world of finance business so that, you know, it paints his presidency in a better light?

4:22I mean, Sujit will have a lot more to say about this, but I think that would be in keeping with what we've seen so far about deregulation. The markets are becoming far less transparent at a time when I would argue we need a lot more transparency. Yeah, Trump doesn't like rules, let alone following them sometimes. And so by relieving companies of these obligations, that's keeping with that. Obviously, you know, he's been a private business owner for a long time. There's been questions about his bookkeeping and there's even a whole case in New York State Court about this. So it is completely consistent with his like sort of obsession over having people at the top of an organization, you know, having complete ability to control the information and power.

5:05Yeah. You know, and it's funny because the point that you all were making earlier about, well, maybe he doesn't want bad information to be out there. Well, I mean, quarterly earnings have been pretty good. You know, there's a lot of point. I'm not so worried about the top companies in particular right now. I'm worried about labor. I'm worried about workers and I'm worried about the way in which the administration is kind of playing Jenga with the economy. You know, it's like just politicizing the Fed, firing the BLS chief. You know, the fact that you've got still, I think, kind of two camps, I would say.

5:39you've got a wall street camp you've got more of a maga camp or say an industrial strategy camp and their actions are kind of constantly in conflict and then you add the president and the fact that he changes his mind a lot on a day-by-day basis and that's what worries me guys i i want to put this in a global context too because we as the u.s report quarterly earnings four times a year but a lot of other countries don't do quarterly reports yeah the uk moved to twice yearly system. Would it be the biggest deal if we did away with it? I've always thought that we needed to rethink reporting from the ground up, to be perfectly honest.

6:19It's kind of like the economy in general. We measure things, right? We measure them imperfectly always. That's kind of the way it is. But the metrics that you pick to measure define then the shape of how you see things. I mean, our reporting standards and how we measure and what we measure both at a macro level and at a micro level haven't changed in a long time, but the economy's changed a lot. And so, yeah, I mean, I would love a really thoughtful conversation that looks at, are we measuring the right metrics on balance sheets? Are we measuring the right metrics in the economy as a whole? Sadly, I don't think that's what you're going to get in this administration.

7:02Sajid, Rana earlier brought up the idea that quarterly reports drive short-termism, the idea that companies are too focused on investor returns than the actual health of the company and doing things that are in the best interest of consumers. Is there an argument there that the quarterly system does enforce that, does motivate that? On some level, that's absolutely true. I mean, if you talk to CEOs, they hate that their stock price rises and falls by a lot on earnings day if they miss by a penny or two. There's all sorts of cases that the SEC and the Department of Justice have brought over accounting fraud about manipulating earnings.

7:41But the thing I would add is that companies know that an ultimate customer of theirs, at least from a corporate point of view are shareholders in large institutions and telling their story is really important. And that's why they have investor days because, you know, frankly, more information can be better. And obviously they want control over that. And when you're reporting earnings, you have some amount of control, but you can't control the results totally. This is not the panacea that some people think it is, even Trump. I mean, again, he put this out in a true social post. Doubt he put much thought into it.

8:13So again, there's going to be a lot more debate on this than you think. Ronna, can you pick apart a little bit of the short-term-ism argument? Yeah, for sure. So my first book actually went into this in some detail. I was always interested in the fact that Wall Street didn't always seem to be supporting Main Street. And that's kind of, if you think, if you go back to just what is the financial system meant to do, it's meant to support Main Street businesses. It's meant to kind of funnel savings to investment in a productive way. If you see, as we have in the last several years, companies announcing share buyback plans, which is, you know, companies go and buy their shares on the open market that sort of artificially increases the price in some way.

9:01Wall Street loves share buybacks, but it doesn't like investment into things that will actually create long-term growth because they're risky. That means that there's less cash on the balance sheet. And so you think about, well, is that actually serving a company's interests beyond the next quarter, beyond the next five minutes? You can argue no a lot of times. And this is, you know, the term quarterly capitalism comes from this. It's also something that particularly in the last decade or two has been talked about in relation to big state run competitors like China that simply don't have to think about and worry about timeframes in the same way.

9:42I mean, you bring up such a good point on such a good day to bring up that point, right? We just saw NVIDIA Thursday invest$5 billion into Intel, a company that the Trump administration has taken a 10 % stake in. Is NVIDIA going to see any of that back? Who knows? Is this actually going to help Intel in the long run? Who knows? Well, a very well-known tech CEO once said to me, America is run like a company. Europe is run like a sort of a technocracy, a technical bureaucracy from Brussels. And China is really state run. And these are fundamentally different systems. And so it's very strange that this administration is both representing hyper-capitalism, hyper-libertarianism, You know, profit at all costs and is also bringing national security and state capitalism into the mix in a way that I'm not sure that the right hand knows what the left hand is doing.

10:47In the past few days, the SEC has made other moves to give CEOs more leverage against shareholders. Suji, do you want to pick those apart? Yeah. One of these is on class action lawsuits and kind of the esoteric way those are litigated. Essentially, the SEC is saying that you can implement a mandatory arbitration clause, which would keep shareholder lawsuits out of court. It's a quieter, more discreet, and potentially corporate-friendly way to handle company disputes with shareholders. And supposedly this is going to unlock more public companies. We talked about this earlier, the lack of IPOs and the fewer public companies that are out there.

11:28And reducing or mitigating the litigation risk is supposedly a way forward. Again, the counterargument is that these kind of lawsuits are actually polices on bad behavior by companies and forces them into best practices. Separately, there's this other story we wrote this week about Exxon, which has implemented this plan to allow retail shareholders to just cede their voting power to the company. Exxon's been in some messy fights with shareholders in recent years. With shareholder activists. Yeah, and every vote counts. So there's a very cynical way of looking at this apart from what they say is their generosity.

12:03I mean, what does this do to shareholder activism? Here at the FT, we're very interested in people like Carl. Icon or Nelson Peltz or, you know, in the case of Exxon, engine number one. Then there was Hindenburg up until this year. Like shareholder activism has become such a big part of what goes on in the C-suite. And these moves from the SEC this week could make that completely disappear. I mean, I find that really fascinating as well. Shareholder activism has always been a double-edged sword, right? I mean, like, yes, of course, there are good reasons sometimes when And there's bad corporate behavior for shareholders to come together and demand change.

12:40On the other hand, as somebody that has spent many an hour interviewing Carl Icahn. Yeah, I was going to say, someone might question his scruples there. And Bill Ackman and the rest of the lot. I don't think they're going in necessarily to make the world a better place. And he wouldn't even say that himself, to be perfectly honest. Sure, of course, yeah. It's about 50-50 as to whether you're creating real long-term value. And the measure of long-term is only like five years or more. And once again, like all things that Trump is playing with right now, it's complicated. And he can make, you can make, one can make, the SEC can make good arguments for what they're trying to do.

13:24Why would Trump and the SEC want to weigh in on this? Well, again, you know, he's a CEO and he likes control. And frankly, the median CEO we talked to, like they they want control. They don't really want to be bothered too much. It could be that they think, again, shareholders are too short term focused. But in general, you know, they just it's just easier when someone's not looking over your shoulder. One other thing that's kind of taking form as we speak is, all right, if you believe that the Trump administration is trying to exert more power in the economy for national security reasons, for example, you could imagine.

14:07I mean, I'm thinking about, for example, some of the greater domestic production that's being done in the drug space. If you think that the administration will continue to say, yes, we need more production at home for national security reasons. Yes, we need to change how supply chains work. Yes, we need to crack down on China. then you can imagine that it would be helpful for companies to not report as often to shareholders and to have more leeway to simply do what they want to do or maybe what they're being told to do by the president without that outside pressure. That would make sense to me intellectually.

14:46Last question, guys. I am curious about whether or not this will impact Trump's populist message to his base. I mean, a big thing that he talks about is the elite, the rich. And this, as far as I am following along, it will increase the power and the wealth of CEOs. So what is Trump's endgame here in terms of retaining his base? Or is that just not a concern? I actually think that he could sell this to his base in the way that I just mentioned. He could say quarterly capitalism isn't serving America. Companies need to be free to make decisions in the national interest. I'm going to make sure that they do that.

15:27Go MAGA. That's a coherent message. Yeah. And I think this is a totally esoteric elite debate and it will not actually be. That's probably true. It will not be salient until there's another financial crisis. What? You mean this is only for FT readers? Unfortunately, but I'm saying if there is another financial crisis and there is another Enron or WorldCom where a bunch of workers and shareholders lose their money in some kind of fraud that wasn't detected, there will be payback for that. But it's not going to happen like kind of theoretically like it is right now, I don't think. I want to thank our guests.

16:04Rana Faruhar is the FT's global business columnist and co-writes the Swamp Notes newsletter. Thanks, Rana. Thank you. And Sujit Indap, the FT's Wall Street editor. Thank you, Sujit. Thanks, Mark. We're going to take a quick break, and when we come back, we're going to do Exit Poll.

16:43Driving operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today.

17:03We are back with Exit Poll. This week, we have Lauren Fedor, the FT's Deputy Washington Bureau Chief with us. Thanks for being here, Lauren. Thanks for having me. So usually on exit poll, we take a question from our audience and then have one of our FT journalists answer it. But this week, I have a question based on a panel that I hosted at FT Weekend Fest in London all about the quirks and the similarities between American and British politics. We released that recording as a bonus episode last week. We're going to throw a link to that in the show notes in case you missed it. Anyway, now that President Trump is back in the U.S.

17:36after his state visit to the U.K., Lauren, I wanted to ask you, what's the status of the two countries and their special relationship right now? The special relationship appears to be alive and well. Donald Trump returned to Washington with nothing but kind of praise for the royal family, for starters. Very keen to talk about the fact that he had this unique honor of a second state visit. And he was very complimentary as well about UK Prime Minister Keir Starmer. These are two men who maybe we wouldn't expect to be natural friends. And yet Keir Starmer in particular seems to have done a good job of charming the president.

18:18And while they have policy differences that remain, you know, everyone seemed pretty happy with how this state visit went. Any surprises from the visit, at least from your point of view? I think, you know, Trump, as he always does, managed to make headlines. One thing that certainly made a lot of headlines in Britain, and we'll probably start a conversation there, is he told Keir Starmer that he should use the military to prevent illegal migration in the UK as well. And then I think the one other thing that President Trump said had to do with this kind of uncomfortable story hanging over the visit, particularly on the UK side.

18:55President Trump himself has faced a lot of questions in the last couple of weeks about his links to Jeffrey Epstein. That is a story that has also resonated in the U.K. many times over and actually resulted in the U.K. ambassador to the U.S. being fired over his links to Epstein. Now, when Trump was asked about it on Thursday, he completely dodged the question and, in fact, said he had never met, never heard of the U.K. ambassador to the U.S., the former one now, Lord Peter Mandelson. Those two gentlemen have definitely met. We have photos of them in the Oval Office. And so I'm not sure that story is going to go away anytime soon.

19:30Got it. All right. Well, thank you for your time, Lauren. That's Lauren Fedor, the FT's Deputy Washington Bureau Chief. Thank you. If you listening right now have a question about U.S. politics and the economy, send me a message at the email in the show notes. Make sure to include your name and where you're from. And if you send us a voice memo of your question, you may even play it on the show.

19:56This was Swamp Notes, the U.S. politics show from the Financial Times. If you want to sign up for the Swamp Notes newsletter, we've also got a link to that in the show notes. Our show is produced by Henry Larson and mixed by Sam Giovinco. Special thanks, as always, to Pierre Nicholson. I'm your host, Mark Filippino. Our acting co-head of audio is Topher Forges, original music by Hannes Brown. Check back next week for more U.S. political analysis from the Financial Times.

20:32I'm Huma Carther, Chairman of Bain & Company's Global Private Equity Practice and host of Dry Powder, a podcast where I sit down with some of private equity's leading investors, such as TPG's Jim Coulter. Somehow the industry keeps growing. KKR's Pete Stavros. Driving operational change is really hard. And Vista's Robert Smith. As a market dampened, guess what? We were able to monetize 18 companies. And of course, I'll take you behind the scenes of Bain's latest research, including our newly released mid-year private equity report. Subscribe to Dry Powder today. I'm David Pilling, Africa editor at the Financial Times.

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