Thursday, November 13, 2008

How To Find CEO Compensation Information

We've discussed here how misalignments can occur between CEO and shareholder interests. In fact, as we saw here, this misalignment may have contributed to the fiasco formerly known as Lehman Brothers. Before investing in a company, it's a shareholder's responsibility to ensure management's pay structure makes sense. For example, if stock options make up a huge part of a CEO's pay, be aware that management has incentives to take big risks to generate big paydays.

Disclosure of the salary, bonuses and compensation structure of the five top executives are an SEC requirement for all public companies in each company's annual proxy statement. As an investor, you can find this info for any US stock you own as follows:

1) Go to the EDGAR Company Search page
2) Enter the ticker symbol of your company and hit 'Find Companies'
3) Search for the latest filing called "DEF 14A"(this is the annual proxy statement)
4) Open that file, for all sorts of goodies about executive compensation

In there, you'll also find a discussion about how the pay/bonus and compensation structure was determined, including some company peer groups that were used as comparisons by the Compensation Committee.

Happy hunting!


kungfu panda said...

hummm... I'm searching for the DEF 14A for Baidu, the Chinese search engine listed in Nasdaq. I'm wondering why I dont see it..hummm..

Could you please shed some light?

Saj Karsan said...

Hi panda,

Foreign companies (Baidu is an ADR) have different rules. This article applies to American companies.

kungfu panda said...

thank you