Remuneration Reports – Boilerplate or Potboiler?
02/04/2007
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Australian company remuneration reports have improved considerably since they first appeared in 2004.  Hermes, a global fund manager that specialises in improving shareholder returns through improved governance, noted in its submission to the ASX on the ASX Corporate Governance Council’s suggested amendments, that Australian remuneration reports are the most interesting and diverse they have seen (see Hermes response and those of others here). 

Despite Hermes’ comments, we think Australian companies have a way to go for a better (if not rollicking) read.  And Australia is not alone.  Apparently complying yet uninformative disclosures are also not well regarded by the US SEC’s chairman.  He recently commented on their experience to date with recent disclosures that, under new laws, are in effect very close to Australia’s.  We reproduce extracts of a recent speech where he echoes the thoughts of many here too.

“But already we’re seeing examples of overlawyering that are leading to 30- and 40-page long executive compensation sections in proxy statements. We’re seeing companies including columns in the summary compensation tables even when there’s nothing to report in those columns. This kind of slavish adherence to boilerplate disclosure is what we’re trying to stamp out.

So it’s fitting that we’re gathered here this morning on Oliver Wendell Holmes’s birthday.

After all, Justice Holmes wrote some of the most important decisions in some of the most complex areas of our jurisprudence. And he did it in famously pithy, short opinions that were often no more than a page or two in length.

He also had a mustache just like Mark Twain, who you will recall famously apologized about one of his own pieces of correspondence by saying, “I’m sorry this letter is so long, but I did not have time to make it shorter.” Twain also classically defined a classic as something that everybody praises and nobody has read. Our object in overhauling SEC disclosure for the benefit of investors is that lawyers stop writing lengthy classics that no one wants to read and start writing like Holmes. We want to replace boilerplate with potboilers.

After all, if one of America’s greatest jurists can cover great legal theories in one page of clean prose with no jargon, why can’t a proxy statement tell a reader what she needs to know about the boss’s pay in the same way?”

Chairman Cox’s interesting speech highlights many practices that are just as prevalent here as in the US. The full text of his speech can be found here.

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