Monsanto Displaying Two Summary Tables
As new SEC compensation-disclosure rules go into effect this month, Monsanto has taken the step of complying before actually being required to do so.
And simultaneously, Monsanto has complied with the disclosure rules that were in effect until this month.
The result is a December proxy statement with the extraordinary feature of having two summary compensation tables – one fulfilling the old requirements and the other, the new.
Mark Borges, Mercer Human Resource Consulting’s comp disclosure rules. Experts say this sensitivity underscores the importance not only of compliance with the spirit (as well as the letter) of the new rules, but of the optics associated with careful compliance.
As Monsanto files its proxy statement in December, the company would stand to suffer by comparison with companies filing under the new rules – for an entire year – unless it went ahead and filed its proxy under the new rules, too.
“Companies are opening up the kimono,” says Paul Dorf of Compensation Resources. That, he says, includes showing compliance in advance.
Failure to do so means companies filing late in 2006 could come up short by optical comparison, as governance advocates and institutional shareholders are champing at the bit to compare the extent, quality, transparency and accessibility of different companies’ compensation disclocures.
Another advantage of this dual disclosure, experts say, is that companies could experiment in 2006 with 2007 disclosure rules with impunity, since the new rules weren’t in force until this year.
“They’re probably just dipping their toes in, testing the waters,” says Patrick Haggarty of James F. Reda & Associates, commenting on the prospect of dual disclosure like Monsanto’s.
The old rules didn’t prohibit companies from adding columns to the required summary compensation table. Other companies that voluntarily complied early with the new disclosure rules in advance over the past year didn’t follow the two-summary-compensation-table rout that Monsanto took.
Instead of filing two summary compensation tables, these companies simply added columns to the old-form summary compensation table – or adding additional tables dealing with specific areas – to increase disclosure in line with the then-approaching SEC requirements.
For example, Analog Devices disclosed the value of its CEO’s change-in-control benefits by breaking down the different components of the contingent payout in tabular form.
And Sanmina-SCI disclosed for the first time in 2006 a dollar amount for its CEO’s total compensation.
Other companies that have added voluntary disclosures in their summary compensation tables over the past year include Ford Motor Company, Viacom, Schering-Plough and Gateway.
Though some experts view Monsanto’s move to use two summary compensation tables as a bit excessive, some companies may find Monsanto’s able fulfilling the new rules instructive for meeting their disclosure requirements in 2007. The reason: Companies whose filing dates are approaching early this year can size up Monsanto’s disclosures- and, more importantly, any regulatory reactions to them – before crafting their own.
This is especially true of qualitative disclosure requirements – that is, things other thant the summary compensation table. For example, Monsanto goes the extra mile of describing the tally sheets that the compensation committee used, a move some experts interpret the new rules as requiring.
Other experts disagree that tally-sheet disclosure is required, arguing that the SEC’s general imperative is for fuller, clearer, more detailed disclosure of the rationale for executive pay – what the comp program is intended to reward, how each element of pay meets that objective and why it was included, and how amounts are determined, including formulas or performance objectives.
With executive compensation disclosures expected by some experts to average 24 pages under the new rules, directors believe tat more disclosure may result in less – that is, that more, longer and more complicated disclosures defeat the purpose of the SEC’s new rules: accessiblility and transparency.
