Tuesday, January 22, 2013

Extremely Deceptive Chart

This is one of the most deceptive charts I've ever seen, straight out of the proxy statement of a company called Kulicke and Soffa Industries (KLIC):

The company appears to be attempting to demonstrate that management compensation is directly correlated with the company's net income. The straight line drawn from a nebulous region of the first grey column into the nebulous region on the second grey column provides an optical illusion that pay is highly correlated with earnings.

The scales give away what's really happening, however. Compensation grew a whopping 67% more than did net income. Figuring this out requires crunching the numbers, however, as the chart makes it appear as though earnings and management compensation grow in perfect harmony!

What happens when net income growth is negative? Conveniently, the last time that occurred (some 3 years ago), this chart was not published in the company's proxy statement.

1 comment:

Mikazo said...

I was just reading the KLIC proxy statement the other day, and I recognize this chart! Thank you for pointing out the deception, as I would not have noticed it. If you're interested, I started a thread on KLIC at Corner of Berkshire and Fairfax: http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/klic-kulicke-and-soffa-industries/