Sunday, June 17, 2007
The Wages of Legalese
According to a recent report from the AP, shareholders are fighting back against corporate legalese.
The issue is executive pay. In the old days, tycoons like Cornelius Vanderbilt (see illlustration) never had disclose their income. Then the SEC came along and decided that shareholders had the right to know how much top executives make -- and so they required companies to include a Summary Compensation Table in their proxy statements. But with their litany of STIP’s, SERP’s, LTIP’s, SAR’s, and ISO’s, these tables usually end up looking like an eye exam, but without the humor.
For this year's proxy season, the SEC demanded that companies spell out the actual pay figures in English. According to the AP, however, the most recent crop of proxies are "long, complex and padded with legalese and jargon." The lack of transparency has led to victorious shareholder resolutions at a number of big companies, and has even prompted the House of Represenatatives to pass a bill giving shareholders greater control in setting executive pay.