TEXT OF INTERVIEW
Bob Moon: The economy might still be plodding along slowly, but many businesses are acting like times are flush. At least that’s what you get from the filings these companies have been submitting to the Securities and Exchange Commission. We’ve called Michelle Leder for help combing through the fine print of those financial statements. She runs Footnoted.org, a Web site that explores the fine print full time. Michelle, thanks for being here.
MICHELLE LEDER: Thanks so much for having me, Bob.
Moon: So you’re running a contest to vote for what you call the worst disclosures in SEC filings. What are some of the doozies you found so far?
LEDER: You know, it was actually, there was a lot to choose from this year. And so far we’ve asked our readers to vote, and what’s in first place right now is a disclosure by Chesapeake Energy that they paid $12.1 million to purchase its CEO’s antique map collection. That’s gotten about 40 percent of the votes so far, so it’s in the lead.
Moon: And I understand that Martha Stewart is on the list as well?
LEDER: Yeah, Martha Stewart is, too. She got a $3 million retention bonus to stay at the company that is called Martha Stewart Omnimedia.
Moon: Hold on, where else is she going to go?
LEDER: Brand X, I don’t know.
Moon: Well if your company is doing well, though, is there any harm in some of these perks?
LEDER: I think if your company is doing well, but I don’t think that’s essentially the case at either of these two companies. Nor, another one that we highlighted here was Freddie Mac, which, you know, has taken over $50 billion in government aid, and they signed up a new CFO and gave him a $1.5 million signing bonus. I mean this isn’t the Yankees here. This is a company that is in deep trouble.
Moon: Well, I suppose it’s possible that they buy the company’s argument that these signing bonuses, in the case of Freddie Mac, for example, are necessary to get and keep the talent.
LEDER: I think that’s certainly the argument there, but, you know, given the number of CFOs that are out there on the market, you would think that you wouldn’t have to pay $1.5 million to attract one.
Moon: You ran this contest last year as well, have you seen any changes in the types or the number of these disclosures?
LEDER: Not really, we’ve been running the contest actually for the past three years. And, you know, in the past we had picked the best footnote ourselves, but three years ago we decided to turn it over to our readers. And it seems that crazy perks definitely garnered the most votes or the most anger from readers. So last year it was a company that disclosed that they had allowed their CEO to purchase a fishing camp, and then the year before that was Quest, the telecommunications company, which had negotiated with their CEO to allow his stepdaughter to fly the corporate jet back and forth to high school. So kinda ridiculous perks seems to get readers’ attention.
Moon: You say your readers are angry, but is this kind of public shaming going to succeed at all? What’s the answer here?
LEDER: I don’t know what the answer is. Perhaps if companies weren’t burying this stuff deep in SEC filings that they thought nobody was reading, and had to publicize it a little bit more, maybe it wouldn’t happen as often as it did.
Moon: But what’s your best guess? Is this going to change or is it going to continue?
LEDER: I think it’s probably going to continue.
MOON: But I guess that’s good news for you, because if they changed, you’d be out of business, right?
LEDER: I would be out of business. And then what would I do with all of my time other than read SEC filings?
Moon: Well, if you’d like to cast your vote for the worst disclosure of 2009, head to Michelle’s Web site, Footnoted.org. Michelle Leder, thanks for being here.
LEDER: Thanks so much for having me, Bob.
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