Prying the most out of proxy statements

Executive compensation is frequent fodder for headlines – just Google AIG and Bank of America, for example.

But even when no alleged scandal is involved, your audience probably loves to read and click on features about what other people earn.

Using proxy statements filed with the Securities and Exchange Commission and a simple spreadsheet program, you can easily put together a local report about executive pay at local, publicly traded firms. Consider an interactive package with photos, bios, notable achievements and other information layered along with the pay data.

And pay practices are only a fraction of the eye-catching info these most human-interest-heavy of regulatory filings contain.

Proxies, also known as Form DEF 14-A, are sent to shareholders each year along with the annual financial report. They get their nickname because a voting card also is included; the shareholders – who are, after all, part-owners – are expected to cast their ballots by proxy if they can’t attend a firm’s annual meeting to vote on the appointment of board members and other governance issues.

Proxy statements are easy to read and follow a standard format.

Things you can learn from a proxy statement:

• Executive compensation. Government rules require a breakdown the most highly-paid executives’ compensation packages, including:

o Annual salary

o Cash bonuses

o Long-term incentive programs (can be cash or stock)

o Retirement provisions

o Stock options, short- and long-term

o Perks. These lists, often buried in the fine print of “other compensation,” make the most interesting reading. They range from executive protection and chauffeured cars to use of corporate plane, financial advice, residential allowances, low-interest loans, club memberships, season tickets to sporting events and other benefits. Many of these items are more reasonable than they sound and appropriate for top-level managers, but if the boss is still swilling champagne in private boxes while factory workers suffer layoffs, you’ll want to alert your audience.

• Directors and committees. The strongest companies have many independent outside directors and forbid inside directors from sitting on the compensation and audit committees.

• Self-dealing – also known as related party transactions – like when the company leases an airplane hangar from the treasurer’s sister-in-law. Legally, such insider dealing must be reported here.

• Performance vs. peers. The proxy statement must include a share performance chart comparing the company’s stock price against a reasonable list of peers in the same industry.

Proxies are readily available via the Securities and Exchange Commission’s EDGAR database of corporate filings. Consider signing up for the “latest filings” RSS feed if you cover a lot of public corporations.

Be creative when contemplating the data. My former employer, The Detroit News, for years ran a very labor-intensive but enlightening annual study called “Serving the Shareholders.” Each year, reporters analyzed data from more than 100 public companies in Michigan, to see who was putting stakeholders first and who was feathering the nests of top managers. It was real page-turner for readers – and local executives.

Other executive pay resources

Doing your own primary reporting is best, but if you need a hand with fast figures about executive pay, here are two handy resources:

• AFL-CIO Executive Paywatch database

• Forbes’ special report on chief executive pay from April 2009