Gold Shower Curtains. $24,000 a month apartments in Manhattan. Sweet contracts for relatives. Additional condos in Vail. $50,000 a month consulting contracts for former CEOs. This is the stuff that corporations don't necessarily want their investors to learn about.
However, this is the stuff corporations have to disclose to the SEC. In other words, if you know what to look for and have the patience to dig around, you can find all sorts of potentially explosive, embarrassing ,and hard to explain expenditures that corporate executives and board of directors would rather stay hidden in plain sight.
SEC filings are the business version of Where's Waldo.
In their SEC filings,publicly traded corporations --and some privately traded companies-- must disclose information like:
Executive salaries, benefits and other compensations.
Crazy Perks ( homes, use of private jets, membership in clubs)
"Related Parties" transactions ( contracts and deals with relatives and associates of executives and board of directors)
While corporations are required to disclose this info, they are not required to disclose the info in 12 point type. Given that these reports are cumbersome its not that difficult to hide it in plain sight.
HOW TO PLAY
Review the numbers. Read the footnotes. Connect the dots.
Know what is considered appropriate use of business funds
Know who are the related parties.
Analyze and compare how the numbers you're seeing compare to the baseline
HOW TO WIN
That depends on whose team you're on.
If you are representing the corporation:
You want to disclose everything you are legally expected to disclose in a way that escapes the attention of snoopy journalists and investors.
If you can get through your filing without any negative publicity or any pesky questions from journalists and investors, You've won!
If you are a journalist or investor:
You win by outing the information. It may be legal, but it may not be fair. Letting the public decide is the ultimate goal If someone were keeping a scorecard,corporations would definitely be ahead in this game. That could be changing all because of business journalist Michelle Leder and her blog Footnoted.org
Michelle spends a good part of every day doing what many corporations wished she wouldn't do...she scours SEC filings and shares the gems she's uncovered on her blog. Some of her recent finds:
Minneapolis based Regis Corporation ( they proudly proclaim on their website that they are 8 times larger than their closest competitor in the beauty industry) likes to keep things "all in the family."
In their latest proxy filing,Leder uncovered that Regis Corporation purchases the magazines for their salons from a company owned by the son of the Chairman. Regis is currently paying around $675,000 in magazine subscriptions.
"Another company run by another son, David, who also sits on Regis’ board, sold more than $400K worth of products to the company. Meanwhile, the son of CEO and President Paul Finkelstein collected $556K in commissions for selling life insurance policies. That’s on top of the $231K the younger Finkelstein collected in fiscal 2004 and another $251K in fiscal 2003."
Speaking in Minneapolis to a group of business journalists at "The Craft of Business Writing" Workshop sponsored by the Donald W. Reynolds National Center for Business Journalism,Leder was sharing how any journalist or investor can find this stuff.
If you want to learn how to read these SEC filings, Michelle provides a HOW TO section on her blog .
Corporations are hoping you'll find it too hard to play.