Do publicly traded companies have to disclose how execs are compensated and what their incentives are? Can investors tell from a prospectus if a CEO has an incentive to artificially pump up the stock price?
Thanks,
Rob
IIRC, the five highest paid executives in a company have to have their salaries and compensation included in the quarterly SEC filing.
The second question is not really answerable. Essentially all executives of all companies will be getting stock options. Whether that gives them incentive to do something illegal is a different matter.
I didn’t mean an incentive for them to do something illegal, but an incentive for them to engage in risky practices, etc. I am asking this in regards to the current crisis and I was wondering if these companies engaged in risky practices due to perverse incentives offered to executives and if transparency would have made a difference here. I asked once if the execs of any of these companies actually did anything illegal and the answer seemed to be no. Now I am asking if they did something that they should have known better than to do and if there were some opaqueness that exacerbated the problem.
Thanks,
Rob
If you look at the “profile” section of the yahoo quotes pages, it lists the income of the key executives, if available. For instance, XOM:
Telling us that CEO Rex Tillerson made $5.11 million, and exercised $3.06 million in stock options last year (2007). I don’t know how much of that data is forced disclosure. You can also find information about insider and restricted share transactions from those pages, which have to be publicly disclosed.
Yes, the compensation of top executives of publicly traded companies is disclosed in the yearly Definitive Proxy Statement, Schedule 14A, filed with the SEC. The statement includes information on salaries, bonuses, “other compensation” (with some details), stock awards, option awards, and current stock and options ownership (including option exercise dates).
A CEO usually has personal incentive to see the stock price rise via his/her ownership of stock and stock options. How short-term or long-term that particular CEO’s vision may be varies from CEO to CEO.
His option exercises probably have to be disclosed as part of executive compensation. But anyone who is a corporate insider must disclose stock trades, including option exercises, even if they do not otherwise have to report compensation.