We started pushing Executive Compensation data included in Proxies/10-Ks for Fiscal Years that ended before 12/15/2006 to our distribution server today. This data is not easily comparable to data filed after these rule changes. The SEC specifically prepared for this lack of comparability by noting “. . .companies will not be required to “restate” compensation or related person transaction disclosure for fiscal years for which they previously were required to apply our rules prior to the effective date of today’s amendments. This means, for example, that only the most recent fiscal year will be required to be reflected in the revised Summary Compensation Table when the new rules and amendments applicable to the Summary Compensation Table become effective, and therefore the information for years prior to the most recent fiscal year will not have to be presented at all.” If you have downloaded EC tables from our server from Proxies and 10-Ks filed in 2007 and 2008 you should have noticed how those tables typically only included one and then two years of data. The SEC’s decision to allow a fresh-start with the new disclosure requirements explains that pattern.
I am highlighting this because it is important to think about the validity of a compensation data time series that crosses these two reporting regimes. There are significant measurement and disclosure differences before and after a registrants adoption of the new form disclosures. For example, registrants were allowed to delay the adoption of FAS 123R until the fiscal year in which they became subject to the new disclosure regime (SEC Press Release).
To highlight and make sure our clients are aware of the differences in measurement we decided not to normalize this data to the same structure we normalize post-2006 data. For example, prior to the regulatory changes there was not a total column. We are not including a total column. The total is really indeterminate because of some significant variability in how individual companies measured equity type awards. Most companies only reported the number of options granted – there was no monetary value established.
To understand the significance of these differences please compare the Summary Compensation Tables from Abbott Laboratories’ 2006 and 2007 Proxy filing.
Notice that the option column reports the number of “Securities Underlying Options/SARs”. Also notice that there is no total reported.
Here is the Summary Compensation Table from their 2007 Proxy (first year under the new disclosure rules).
One year of data and a monetary value (determined by application of FAS 123R) for the Option Awards. Further, despite similar column headings the process under which the amounts included in most of the other columns changed substantially. For example, the new rules state that “As we proposed, compensation that is earned, but for which payment will be deferred, must be included in the salary, bonus or other column, as appropriate.”
To illustrate the results from pulling this data from our server the next image has the summary data file created using a request file for 2006 and 2007.
As I noted earlier, we are not adding a calculated Total for data that does not originally include a total.