Reading "Between The Lines" In Annual Proxy Statements

Upper Saddle River, NJ - May 11, 2005 - Now that a large number of the proxy statements for public companies with fiscal years ending issued, those of us who investigate them for a lifetime, as well as those that have invested in on December 31, 2004 companies, have a chance to analyze. their remuneration packages in detail With all the attention on corporate governance and how to improve the level of transparency and to ensure that there is a strong relationship between pay and performance, these explanations for interesting reading.

Many comb through these filings with the intent of learning as the fee is reflective of recent trends toward "pay-for-performance". In reality, accurately reflect the offsetting financial performance of the company? And does it make sense? We are also interested in learning how companies respond to the recent and expected changes in tax, accounting rules, and related legislation and the extent to which these changes affect executive compensation design.

With this in mind, we have read in several recent cases, which when analyzed, still leaves some doubt whether the companies are as open and straightforward as we all hoped. Unfortunately, there is still a tendency for companies to use. Ambiguous, unclear language In some cases, the link to the performance is still questionable. The key is to read what has been presented in great care taking into account what has been said and in some cases, which is not being said. Some examples of recent proxy issued by a large company can demonstrate why it is important to read and interpret carefully:

"Our policy is to the tax deductibility of compensation payments to (Top Management) under Article 162 (m) of the Internal Revenue Code and the regulations thereunder (Section 162 (m)) to maximize. Our shareholders have approved our incentive plans designed and managed to qualify compensation awarded thereunder as "performance-based." However, we must allow payments to (Top Management) that may not be fully deductible if we believe that such payments are in the interests of our shareholders. "

This means that the programs are consistent with the Internal Revenue Code § 162 (m), however, and it is a big BUT, they can not qualify for exemption under the one million dollar cap, and therefore would not tax deductible. We think it is a lot to see how it is in the interest of the shareholder, as a non-deductible expenses reduces the profitability of the company.

"(Top Management) wage is compared with (Key Sales Management) pay to ensure appropriate internal ratios are achieved."

While the internal equity and hierarchical relationships are important in the situation of this company, Key Sales Management consists of some very highly compensated sales types that can actually push up the Top Management wage, if the company tries to maintain internally. Equity The reality is that top sellers / manufacturers can make large quantities, but it is based on their individual performance achievement, and so it may be more than the amount that would be paid to corporate officers are. Trying to maintain an artificial differential can not be justified, even in the best interest of the shareholders.

"(The CEO) participates in a number of defined benefit plans, including some unfunded executive plans .... The amount .... is .... not less social security or other compensatory payments."

Most large companies have some form of additional Executive Retirement Program (SERP), non-qualified pension benefits offered by the government regulations over and above those allowed. The standard in the design of these plans, which are typically very generous and have a time instead of performance commitment is that other company-sponsored retirement programs, 401 (k) matches, and Social Security benefits would be provided compensation. Although in the scheme of things, the lack of compensation for these additional benefits can be a big expense, it is still a hidden benefit that should be quantified and disclosed.

"As described above, unlike compensation in prior fiscal years, we did not ascribe a value to compensate for the accrual period features (the CEO) restricted stock units based on a discount of 25% of the market value of the ordinary shares and the transfer restrictions on the restricted stock units. "

At first reading, this seems to make sense, but after several readings, we're still not sure what this means, the restricted shares discounted or not? This is an example of ambiguous and confusing language that companies should work to avoid.

The bottom line is that while many companies are becoming more and more open to respond to regulatory and shareholder requirements in their public disclosures, more work is needed to have full transparency. In the meantime, let the reader be wary.

Compensation Resources, Inc. provides compensation and human resources consulting to medium and Fortune 500 clients such as public, private, family-owned and emerging companies. CRI specializes in Executive Compensation, Payroll, Performance Management, Sales Compensation, and expert witness services. Our reference library has over 4800 surveys.

Bad News - Why The Financial News Media Can Cost You Money!

The communication innovations we now have around us, such as the internet, financial newspapers, and special interest channels focused on investing like CNBC are a high speed pipeline of nonsensical chatter. All these sources of information mean that there is no shortage of media people trying to answer our questions about the stock market and specific stocks. You have to remember that the news media are constantly competing to survive against other things you can look. If they do not always sound like they know exactly what is going on then you will not watch their presentations. If you do not tune in their actions than their ratings go down. If their ratings go down they fired and her show is canceled.

This means that financial journalists are in the business of finding great stories and sounding like authorities no matter what. The fair is to dig up news 'scoops' to feed to the public. A great place for them They do not really check their facts very well and sometimes not at all. This means that if some insider wants to feed you a line of bull manure then all they have to do is to maintain good relationships with financial journalists, sponsors see an investment, or outright an investing TV channel like Jack Welch, the CEO of GE, buy did when he set up CNBC. What a great way for executives within the flow of news information to the public then the control to actually own one of the only financial news channels ... but not so great for you!

These journalists also kick up the fire to bring in 'experts' to talk about each side of some topic that real experts would not consider. Important by This just makes it all the more confusing for the public to understand what is important when buying or selling a stock. Shows on CNBC like 'Closing Bell', 'Kudlow & Company', and 'Mad Money' do nothing but confuse and mislead the attention of most individual investors in the audience. Worse, this means that the financial news media allows overpriced stocks recommended by analysts in the inside web that inside executives dumping on the public because they are trying to get out. This actually happened at the top of the bull market in 1999. For a great historical description of what happened read Maggie Mahar's book entitled "Bull. "

The famous Yale University economist, Professor Bob Shiller, Ph.D. is particularly hard on the media in his book "Irrational Exuberance." Dr. Shiller is one of the economists that Alan Greenspan respects most and where he coined the term "irrational exuberance. "He portrays the media as sound-bite-driven where superficial opinions are preferred over in-depth analyzes. I whole heartedly with him and contend that it happens, just because the industry would prefer the small investor confused and emotionally pliable to you to buy and sell when they want with total disregard for your interests!

People who had invested their savings in the stock market were ripped off in the stock market because the financial news media and analysts were hyping what a great buy stocks were at the top of the market in 1999 and 2000. At the same time inside corporate executives were selling everything they had. What is amazing is that our federal government in the form of the Security Exchange Commission never did a thing about it. There was never a blanket case taken or an outcry that almost all of the inside executives had crashed six months for the market to magically sold out of the market.

Here is the valuable tip I can consider in this edition of 'The Wallet Doctor ": if you are a beginner investor it is important that you NOT THE FINANCIAL NEWS NOT watch or read FINANCIAL NEWSPAPERS! Do not let the stock market industry lead you around by the nose like cattle to the slaughterhouse. Do not listen to what they want you to listen to. You should focus on learning what is important in the stock market and the mass media will only confuse yourself until you have trained. Also, remember that I will show you how to focus on what is important for stocks that are priced low, but probably identify lower, because the insiders are buying them and I'll show you when to sell when the same insiders probably dumping the same stocks on the public in my course "The Blue Collar Base Bonanza - What the insiders [certainly] not want you to know!" You can get more information about the course course website get
Recommended reading:

1. Mahar, M. Bull! A History of the Boom, 1929-1999 (New York, Harper Business, 2003)

2. Shiller, R., Irrational Exhuberance, (New York, Broadway Books, 2000)

I wish you great abundance in your life that you deserve through what you are and remember that happiness is found only in the precious present moment!

Dr. Scott Brown, Ph.D., the Wallet Doctor, is a successful futures trader, real estate investor, and stock investor. Dr. Brown has a Ph.D. in finance from the University of South Carolina and a Master in International Management from the prestigious American Graduate School of International Business aka Thunderbird. His 1998 articles in technical analysis of stocks and commodities were prophetic in predicting an impending stock market crash. He has helped many people profitable investors by looking out over many years to spot stocks that are low and ready to rise in the new bull market. In 1998 he was shouting to the world? Get out? of the fair, but now he is shouting to everyone that it's time? get? The Wallet Doctor is not only sought after for investment advice and coaching to invest in stock but also in futures trading and real estate investing. For more information visit Dr. Brown? S site  or sign up for his investment tips