“(Top Management) pay is compared to (Key Sales Management) pay to ensure appropriate internal relationships are achieved.”

While internal equity and hierarchical relationships are important in this company’s situation, Key Sales Management consists of some very highly compensated sales types that may actually push up Top Management pay, if company tries to maintain internal equity. The reality is that top salespeople/producers can make huge amounts, but it is based on their individual performance achievement, and therefore it may be more than amount that would be paid to corporate officers. Trying to maintain an artificial differential may therefore not be warranted, nor in best interests of shareholders.

“(The CEO) participates in several defined benefit pension plans, including some unfunded executive plans….The amount estimated….is….not subject to deductions for Social Security or other offset amounts.”

Most large companies have some form of Supplemental Executive Retirement Program (SERP), which provides non-qualified retirement benefits that are over and above those allowed by government regulations. The standard in designing these plans, which are typically very generous and have a time rather than performance commitment, is that other company-sponsored retirement programs, 401(k) matches, and Social Security would offset benefits that are provided. Although in scheme of things, lack of an offset to these extra benefits may not be a large cost, it is still a hidden extra benefit that should be quantified and disclosed.

“As described above, in contrast to compensation in prior fiscal years, we did not ascribe a value to (the CEO’s) restricted stock units based on a 25% discount from fair market value of common stock to compensate for vesting characteristics and transfer restrictions on restricted stock units.”

At first read, this seems to make sense, but after multiple readings, we still aren’t sure what this means; have restricted shares been discounted or not? This is an example of ambiguous and confusing language, which companies should work to avoid.

The bottom line is that while many companies are becoming better and more open at responding to regulatory and shareholder demands within their public disclosures, more work is necessary to have complete transparency. In meantime, let reader be wary.