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By Jeremy Glaser | 03-10-2010 05:41 PM

Outrageous Perks and Pay Exposed

Michelle Leder of footnoted discusses why the proxy statement is the SEC's sexiest filing.

Jeremy Glaser: For Morningstar.com, I'm Jeremy Glaser. With proxy season about to get started, I'm here with the newest member of the Morningstar family, Michelle Leder from footnoted, to see what investors should watch out for. Michelle, thanks so much for joining me today.

Michelle Leder: Thanks for having me, Jeremy.

Glaser: So when you're taking a look at a proxy, what are some of the big things that an investor should be looking at?

Leder: Proxies are really one of the sexiest documents out there. Can we use the word "sexy document" in the same sentence?

[laughter]

Leder: But they really are. For someone who really finds these things, they can be really, really interesting. Why is that? Because they have all of the information about compensation in there.

Compensation is one of those things that's really a giant taboo here in this country. You would never walk up to someone and say, "Hey, Jeremy, what do you make?" It's kind of embarrassing. You wouldn't ask me that question right here on TV. But it's the type of thing, when you're a publicly traded company, that CEOs and other top executives are required to disclose. And so it's kind of an interesting thing to look at. And you can see, how did the CEO do? How does it stack up against other CEOs in the same industry?

Glaser: Now, I know there were a lot of changes to the way that compensation had to be disclosed a few years ago. Have you noticed that companies are doing a better job at letting you know exactly what kind of perks executives are getting, or is it still somewhat opaque?

Leder: It's still somewhat opaque, and you kind of have to put numbers together, but it is much easier to decipher than perhaps five or even 10 years ago. So what you have is companies are listing the straight salary. They're talking about the bonus. They're talking about the different pieces of the compensation, which is stock options and other long-term compensation.

And then the perks, which I love to pay attention to. And we're finding all sorts of crazy things, whether it's a million dollars spent on a corporate jet. Or the other day, we were looking at a director of GE, for example. Large company there. And one of his perks was a million-dollar donation to the charity of his choice. That's an interesting thing. Yes, you can argue it's a charitable donation, but it's very nice to be able to make a million-dollar charitable donation in your name and someone else pays the price.

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