SEC Filings Master Class - Proxy Statements by Michelle Leder


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Michelle Leder, founder of, presents "Diving through Proxies" as part of the free, three-part, investigative business journalism webinar, "SEC Filings Master Class."

For more information about how to use SEC Filings in your reporting, please visit

For more information about free training for business journalists, please visit

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SEC Filings Master Class - Proxy Statements by Michelle Leder

  1. 1. Diving through proxies Using proxy statements wisely Michelle Leder editor/founder footnoted @footnoted Photo by flickr user TauchSport_Steininger
  2. 2. Review homework assignment: Take a closer look at the HPQ 10-K filed on Dec. 27, 2012: 211959z10-k.htm Things to note: •Filing was made Dec. 27 just a few minutes shy of 5 p.m. It wasn't a Friday, but it was during the dead week between Xmas and New Year's when few people are working. •Language in risk factors clearly spells out the many challenges the company faces. Company uses the word challenges 9 times in the risk factors, compared with just 3 times in the prior year. •One risk factor is devoted to problems overseas, particularly related to the Foreign Corrupt Practices Act, which is a new disclosure.
  3. 3. POLL QUESTION #1 How often do you read proxy statements? •I’ve never read one. •Once or twice •Periodically for companies I really follow •It’s my favorite hobby.
  4. 4. What's so interesting about a proxy statement? • Compensation, compensation, compensation (plus lots of perks) • Director bios, compensation, committee assignments and meeting attendance • Related-party transactions • Audit-related fees • Shareholder proposals Photo by flickr user Victor1558
  5. 5. How can you find the proxy? • SEC's Edgar site (can search by ticker or company) • Investor relations section of company site • Google Finance, Yahoo Finance, or any number of other large finance sites • Simple search: “Yahoo proxy 2013”
  6. 6. The sum of the pieces • Like the 10-K, the proxy statement (or DEF14A if we want to get all formal) has very specific pieces. • Thankfully, it’s much shorter than the 10K. • Typical proxy is < 100 pages, though many are larger. • Compensation takes up largest chunk of proxy. • March Madness: Proxy season typically starts in mid- March and goes until April 30. • Many companies have been giving their proxy statements extreme makeovers to make them easier to read.
  7. 7. A closer look at Yahoo's proxy: • This proxy was filed after 5 p.m. on April 30. • At 97 pages, it’s on the longer side, but not unusually bulky. • The good news? You don't have to read all 97 pages! • Let's focus on the most interesting parts.
  8. 8. Start with the summary-comp table Skip straight to this chart by typing "summary compensation"
  9. 9. Beware of common traps • Too many journalists take the total-comp number in the last column as gospel. It isn't. • The rules for reporting stock options are complicated, and it's very easy to think you're getting it right, but get it wrong. • Pay close attention to executive changes from year to year. Once an executive leaves, you may not get any more info on him/her. • Companies often time departures to limit disclosure.
  10. 10. What I look for in the summary -- comp table • Mix of compensation (cash, stock, perks) • Trends in compensation • Comp for former execs • Weird disclosures: apartments in Paris, fish camps, excessive corporate jet usage, moving expenses for the family pet, wine cellars Photo by flickr user seantoyer Photo by flickr user andyrusch
  11. 11. Yahoo’s summary chart • What’s the first thing that jumps out at you?
  12. 12. Even more compensation • Next, I like to skip to the director-compensation table. • This isn't always as easy to find as the summary- comp table, but it's always there. • Often provides good insight into company Photo by flickr user Tax Credits
  13. 13. Director comp at Yahoo isn't so simple 9312513187918/d501548ddef14a.htm
  14. 14. Director comp at Yahoo isn't so simple • These are two of the 22 footnotes that accompany this chart. • Cash vs. stock mix • All other comp (small here, but pretty common) • Compare with how many times directors met
  15. 15. Director bios One-stop shopping: bio, length of board service, board committees, other boards he/she sits on What the bios normally look like. Zoomed in and (somewhat) legible.
  16. 16. Board attendance • Hard to get a real feel for this. Usually get boilerplate disclosure. But every now and then, there's something good. Meetings and meeting attendance Our Board of Directors holds regularly scheduled quarterly meetings. Typically, committee meetings occur the day before the Board meeting. During one quarter each year, the committee and Board meetings occur on a single day so that the evening and following day can be devoted to the Board’s annual retreat, which includes presentations and discussions with senior management about Microsoft’s long-term strategy. In addition to the quarterly meetings, typically there are two other regularly scheduled meetings and several special meetings each year. At each quarterly Board meeting, time is set aside for the independent directors to meet without management present. Our Board met eight times during fiscal year 2012. All of our directors attended 75% or more of the aggregate of all Board of Directors meetings and meetings of the committees on which they served during the last fiscal year. Directors are encouraged to attend the Annual Meeting of Shareholders. Five of the nine directors then on the Board attended the 2011 Annual Meeting.
  17. 17. QUESTION #2 What’s the most interesting related-party transaction you’ve ever found in a proxy? Please type your answer in the chat pod.
  18. 18. Related-party transactions • Can be called different things and in a different place in each proxy, so you often need to search • Look for "related party," "certain transactions," "transactions with officers and directors" to start with. • Almost always worth reading very carefully. Am often amazed at what companies disclose Photo by flickr user outcast104
  19. 19. Audit-related fees • There's rarely a smoking gun here, but there's sometimes an interesting detail. • Audit fees up 21% over past year
  20. 20. Shareholder proposals • First few proposals are usually proposed by the company (re-election of directors, appointment of auditors, other routine corporate actions). • The others are the ones you want to pay attention to. • Newest one is "say on pay." • Remember: even if a shareholder proposal wins the popular vote, the company chooses whether to adopt.
  21. 21. Your homework: Barnes & Noble • Company has had its ups and downs lately. • Read the related-party transactions (pages 47- 51), and come up with 3 key bullet points: 13305921/d571208ddef14a.htm • Email your answer to by noon ET Thursday, Oct. 10, to be entered in a drawing for for Michelle's book.