Michelle Leder, founder of Footnoted.com, 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 http://bit.ly/secfilings2013. For more information about free training for business journalists, please visit http://businessjournalism.org.

1. Diving through
proxies
Using proxy statements wisely
Michelle Leder
editor/founder footnoted
mleder@footnoted.com
@footnoted
Photo by flickr user
TauchSport_Steininger

2. Review homework assignment:
Take a closer look at the HPQ 10-K filed on Dec. 27, 2012:
http://www.sec.gov/Archives/edgar/data/47217/000104746912011417/a2
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. 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. 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. 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. 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. 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. Start with the summary-comp table
Skip straight to this chart by typing "summary compensation"

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. 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. Yahoo’s summary chart
• What’s the first thing that jumps out at you?

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. Director comp at Yahoo isn't so
simple
http://www.sec.gov/Archives/edgar/data/1011006/00011
9312513187918/d501548ddef14a.htm

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. 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. 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. 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. 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. 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. 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. 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:
http://www.sec.gov/Archives/edgar/data/890491/0001193125
13305921/d571208ddef14a.htm
• Email your answer to
cassandra.nicholson@businessjournalism.org
by noon ET Thursday, Oct. 10, to be entered in
a drawing for
for Michelle's
book.