It's The Thought That Counts

If someone else wrote your Christmas wish list, it probably wouldn't include the thing you want most. When it comes to the content of CD&As, only one list matters - the one written by the SEC last year - and the rest of us are stuck with what we get, no returns or exchanges allowed. (I swore off insipid holiday metaphors a year ago, but I also swore off salt and vinegar potato chips and that’s not going so well either.)

In its October report card on CD&A disclosures, the SEC told companies to stop rambling on about general compensation philosophies without explaining how they'd gotten to the actual numbers in the compensation table. But the report barely mentioned the #1 item on the Proxyland wish list for CD&As: analysis of how an executive’s overall “wealth accumulation” affects the level and structure of his compensation. For example, if someone has gotten rich through mega stock option grants, might that lessen his need for a huge retirement payout, or dilute the "incentivizing" effect of piling on more options? As noted here a while back, the answer to this question seems obvious, which may explain why companies prefer not to ask it.

Since it’s too damn cold to go out and shop, I decided to see how many of the 343 proxy statements filed since November 1 include the phrases “wealth accumulation” or "accumulated wealth" in the CD&A. The answer seems to be 7, and I've summarized the analyses for your convenience:

Tyco International Ltd. (TYC) and Robbins & Myers, Inc. (RBN): WE'VE USED THE WORDS "WEALTH ACCUMULATION" IN PASSING, BUT THAT'S ABOUT IT.

Revlon, Inc. (REV): WE'VE THOUGHT ABOUT THE CONCEPT, BUT IT TURNS OUT NO ONE HERE IS THAT WEALTHY.

From Revlon's CD&A: “As a general matter, since the Named Executive Officers have not realized any meaningful wealth accumulation from equity Awards or other incentive compensation, as described above, the absence of wealth accumulated from prior compensation, such as equity Awards, has influenced setting base salaries."

Acxiom Corp (AXCM): WE LOOK AT ACCUMULATED WEALTH WHEN DECIDING ON LONG-TERM EQUITY AWARDS, BUT THAT'S ALL WE'RE GOING TO TELL YOU.

From Acxiom's CD&A: "The amount of RSUs and stock options were based on the Committee’s evaluation of a number of factors which included each recipient’s responsibilities and demonstrated performance, internal pay equity, accumulated wealth analysis, analysis of the benchmarking data discussed above, and retention considerations."

Monsanto Company (MON): WELL, WE DID A WEALTH ACCUMULATION ANALYSIS WITH RESPECT TO OUR CEO (WHO HAPPENS TO HAVE THE SAME NAME AS ACTOR HUGH GRANT), BUT WE DECIDED IT SHOULDN'T AFFECT HIS COMPENSATION EVEN THOUGH HIS TOTAL COMP FOR 2007 WAS NEARLY $11 MILLION, FORBES LISTED HIM AS THE HIGHEST-PAID EXECUTIVE IN THE CHEMICAL INDUSTRY FOR 2006, AND SOME MIGHT SAY HE HAS A LOT OF EQUITY. OH, AND WE'RE NOT GOING TO EXPLAIN OUR REASONING EXCEPT IN A VAGUE WAY.

From Monsanto's CD&A: "The Committee made no adjustment to Mr. Grant’s compensation or to the program design as a result of the analysis, based on its assessment that the existing program provides strong alignment with the creation of shareowner value, as well as retention value.”

Batesville Holdings, Inc.: WE PLAN TO FACTOR WEALTH ACCUMULATION INTO OUR COMPENSATION DECISIONS IN THE FUTURE. (AFTER ALL, WE'RE IN THE "DEATH CARE" BUSINESS SO WE KNOW YOU CAN'T TAKE IT WITH YOU.)

From Batesville's CD&A: “We expect that wealth accumulation data will be used in setting compensation for our Named Executive Officers going forward.” (Legalistic note: This was not technically a proxy statement, but a 10-12B filing related to the upcoming spinoff by Hillenbrand Industries (HB) of its subsidiary, Batesville Casket.)

Financial Federal Corporation (FIF): WE DON'T REALLY CARE HOW RICH OUR EXECUTIVES GET.

From Financial Federal's CD&A: "The Committee does not believe accumulated wealth from prior compensation or significant compensation from one component of compensation should necessarily negate or reduce compensation from other components. For example, if an officer's equity awards are providing significant compensatory value because the Company's stock price has been appreciating, that would not cause the size of future equity awards or other compensation to be reduced."


All 7 companies deserve credit for at least mentioning wealth accumulation. even if most don't intend to change their ways. As for the 336 firms who failed to use the magic phrase, I will forgive you provided you each ship me one of those gynormous popcorn tins.

p.s. This post was changed to correct an error in a number. The mistake was only up for about an hour before I caught it, but you never know when some unfortunate soul might be reading this thing.