Tuesday, January 16, 2007

Wag of the Finger/Flip of the Bird

Stephen Colbert has a recurring segment called "Tip of the hat/Wag of the finger," where he alternately praises and condemns something or other. I thought I should have something similar, but since I rarely have anything nice to say, I've decided to call it "Wag of the Finger/Flip of the Bird."

Yes, I know both involve wagging fingers. That's not the point. It's the intensity that counts.

Unfortunately, my first wag of the finger goes to me. During the holidays, I predicted that incoming House Financial Services Committee Chairman Barney Frank would hold hearings on CEO pay (which is admittedly a no-brainer, since he had already said as much), but also that several professors would testify that high CEO pay results from a combination of a "Lake Woebegon effect" plus poor corporate governance standards. I also said all of this will be ignored and Congress will instead focus on some kind of CEO windfall tax. Then, on Dec. 27, Barney Frank let loose a broadside at the SEC regarding its year-end rule change regarding CEO compensation disclosure (see here). I noted that the SEC's decision to allow companies to disclose executive stock option awards over time, as they are exercised, made sense since that method of disclosure paralleled FAS 123R, the relevant accounting standard. However, I also said that Frank had a point, in that what many shareholders really want to know is when the board grants executive stock options (and how much), rather than how much they are costing the company each year as they become due.

Well, that was wrong. As Kevin Drawbaugh of Reuters reports (US SEC's Cox: no options hiding in exec pay rule), the new SEC rule does indeed change how public companies need to report the costs of stock options (i.e., as they options are exercised), but they still have to report option grants as they are issued, and in their entirety -- just in a different section on executive pay. I probably could have figured that out if I had actually read the SEC rule release all the way through, and parsed its extraordinarily boring language, and cross-referenced it with other SEC rules. But I didn't. Because it was boring. And I have a real job. (BTW, one of my homies was asking how I have time to do this and my real work. It's because I make these things up. If I had to actually get my facts down airtight, it would take me a long time and this wouldn't be nearly as much fun.)

So, wag of the finger to me. But while I'm at it, wag of the finger to the SEC, for writing such a deathly boring rule release and not accompanying it with a press release that highlighted, bolded, italicized, and included an XBRL-encoded .wav attachment that screamed at you that this new rule means companies now have to disclose all the information they used to, plus more!

More importantly, though, a Flip of the Bird goes out to Congressman Barney Frank. First, for making me wag my finger at myself. It's terribly bad ergonomics. But the Flip also goes for going off half-cocked like that. Don't you have anyone on your staff able and willing to read through these boring SEC rule releases? Maybe make a few phone calls on the ones they don't understand? I know House members get stuck with the dregs of Congressional staffers, but you would think with a new chairmanship you could at least hire someone who could make a few phone calls. But, no, instead Frank issues this press release and gets me (and apparently some shareholder activists) all confused. Since the Commission voted five to zero on this (and that includes two Democrats), you might want to see what's going on before getting all "very disappointed."

Or was it that you were offended that the SEC would do something like this without consulting you first? Hey, I know you've been itching a long time to get a position in Congress where you are actually relevant, but you shouldn't need that much hand-holding. Ok, ok, you're relevant and important! Now, with that little bit of affirmation out of the way, step back and get your facts straight before your next tirade. Because otherwise I'm going to have to go read all this crap, and I just don't have the time.

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