SABEW members get tips on covering executive compensation

(Note: Click here to listen to the conference call replay. You will need to be a SABEW member.)

Figuring out how much top execs get paid is one of the most challenging topics for business journalists.

To help decipher and decode the complexities, a panel of expert journalists and a compensation consultant gave more than 100 business reporters useful advice on how to figure out CEO pay, pensions and severance in a training teleconference Wednesday sponsored by the Society of American Business Editors and Writers.

The 90-minute conference, accompanied by a Web-based presentation of key points and sample securities documents, was timed to coincide with the start of the proxy season. It offered detailed guidance on the SEC's revised rules for company disclosure of executive compensation, including:

• What’s new this year in how companies are presenting their information on compensation;
• How to analyze a company’s policies on performance and compensation;
• An explanation of The Associated Press’s formula for determining a bottom-line figure from the compensation and stock awards tables in a proxy filing, as well as discussion of alternative formulas
• How to find details on bonuses, stock grants, options and other forms of compensation;
• How to look at severance and pension plan disclosures;
• How to look at compensation in terms of what’s granted, or what’s actually pocketed;
• How to distinguish between guaranteed pay and “at risk” pay;
• How benchmarking works in setting, and sometimes inflating, pay levels.

The panelists included Rachel Beck, a business columnist for The AP; David Milstead, finance editor at the Rocky Mountain News, and David Wise, an executive pay consultant with Hay Group. Moderating was Dave Kansas, former editor of The Wall Street Journal’s Money & Investing section who now leads the personal finance Web site filife.com.

In the call on executive pay, Milstead misstated the Corporate Library’s formula for adding up executive pay.

The Corporate Library does not include both the value of options at the grant date and the profits on exercised options in determining a total compensation number in any given year. According to the St. Louis Post-Dispatch, which uses the method as one of the ways it measures pay, the Corporate Library includes the value of restricted stock that vests during the year and profits on exercised options.

Milstead said, “This is a far more defensible method than the one I criticized, which is including both the value of options at the grant date and the profits on exercised options. This, as I said, leads to double-counting in the long run and should be avoided.”

SABEW will soon post an audio file of the conference, along with the slides, on its Web site at www.sabew.org.

Posted Feb. 29, 2008