Buried Details

By Michelle Leder

December 15, 2008

Even with all of the filings that I’ve read over the years, every now and then, I come across something that just makes me slap my head and say, “What the heck were they thinking?” And that’s exactly what happened when I skimmed the proxy that A. Schulman (SHLM) filed just before Thanksgiving. Here’s the head-slapping part:

“During fiscal 2008, the Compensation Committee determined that maintaining a lease on a private airplane was no longer a cost-effective method for providing business-related transportation to our Named Executive Officers and Directors. The airplane was used only for business-related travel, and personal use was not permitted. With the termination of the lease on the airplane, it also became increasingly difficult and cost prohibitive to access our Canadian fish camp. Consequently, the fish camp, which was only used for business entertainment purposes, was offered for sale during 2008. The only offer to purchase the fish camp came from Terry L. Haines, our former Chief Executive Officer and President. Ultimately we negotiated with Mr. Haines to sell the fish camp for a purchase price of $55,000 and the transaction closed during fiscal year 2009.”

There’s so much to poke at here that it’s almost hard to know where to begin: The leased airplane for business purposes only? The fishing camp in Canada? The fact that the airplane was no longer necessary because the fishing camp was sold? The sale of the fishing camp to the former CEO? The bargain basement price?

Of course, there’s a back-story here. A. Schulman has been targeted by activist investors Ramius Capital and Barrington Capital for several years now. There’s a good summary of events here. Haines left in March and oddly enough, a quick skim of his agreement doesn’t mention anything about the fishing camp, even though it does mention $2.4 million in cash, $1 million in deferred comp, lots of options, and a host of other goodies, including his laptop and his company-owned car.

Indeed, the fishing camp, which the company apparently bought in 1952, was never even mentioned in any company filings prior to last year’s proxy, which seems like an odd coincidence, since it was right around the time that Ramius began its campaign.

For business journalists, there are a few lessons to learn here.

It hardly seems coincidental that this shocking disclosure was filed days before a major holiday when few people, including journalists, were likely to pay attention. That the only way you would know this was a new disclosure was by reading older filings and that the disclosure itself was buried is also significant.

Remember: the most important thing to remember when you dive into SEC filings is that companies are required to disclose all sorts of things in their filings. But there’s no rule or regulation that requires them to make it easy for you to find, or perhaps even more importantly, understand.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism