Wednesday, February 21, 2007

Story Hour

John White, head of the SEC’s Division of Corporate Finance, says the new Compensation Discussion and Analysis (CD&A) is the place for companies to “tell their compensation stories.”

Make that a bedtime story. We have seen the CD&A and it is...long. Take the one in the proxy that SunTrust Banks, Inc. (STI) filed Friday. It just goes on and on. And on. For ten pages.

Thanks to the CD&A, we can now appreciate the deep thinking behind some compensation decisions. For example, Suntrust tells us why it provides senior executives with free financial planning, which cost $10,650 last year for CEO L. Phillip Humann (retired as of January 1), a guy whose total compensation nudged $8 million:

We believe that good financial planning by experts reduces the amount of time and attention that senior management must spend on that topic and maximizes the net financial reward to the employee of compensation received from SunTrust. Such planning also helps ensure that the objectives of our compensation programs are met and not frustrated by unexpected tax or other consequences.”

OK, fine. No one wants the CEO to be running Quicken Deluxe when he should be running the bank, and we will even refrain from snidely pointing out that if you paid him fewer truckloads of cash his financial decisionmaking would be less burdensome.

We will not, however, refrain from noting that SunTrust's explanation explains absolutely nothing. Sure, someone earning 8 million bucks probably could use financial advice, but that doesn't mean shareholders must pay for it. The same benefits would accrue if Humann just peeled $10,650 off the roll of bills SunTrust gave him and handed them to his accountant, the way I might toss some coins in the tip jar at Starbucks while they make me that nonfat half-caf triple grande quarter sweet sugar free vanilla nonfat lactaid extra hot extra foamy caramel macchiato.

Oh,wait. Sorry, kid, forget the half-caf part. I have more CD&As to read.