Bob Schneider is a Partner in 
Wilson So is the Director of Hitachi America, Ltd. The New SEC Reader for Executive Compensation
Written by Bob Schneider Posted on January 5, 2008
The SEC launched its long-awaited Executive Pay Reader just before the holidays, and it is receiving strong press coverage, almost all of it positive. After working with the tool a bit, I agree with Gary Purnhagen’s forecast last spring that the Reader is likely to be “a brilliant publicity move for XBRL.”
There is a tremendous amount to like about the Reader. Investors will be impressed by the tool’s ability to quickly retrieve pay data for top executives of the 500 firms covered in the database. I like the quick links to company proxy statements (which contain the detailed comp data) for more exhaustive analysis. Ascending and descending sorts are speedily applied on any field in the dataset. As Gary predicted, it’s likely that many users, realizing how cool interactive data can be, will become firm supporters of adopting XBRL for companies’ quarterly and annual filings.
Here are some tips for getting better use out of the Reader:
(1) Using the tool is a two-step process. First, search for the companies you want. Second, click Display Compensation Data to retrieve the pay info, which appears on the Summary of Executive Compensation page. Don’t worry if you left a company out in your initial search — the Reader allows you to add comp data for other firms to the pay records you’ve retrieved.
(2) Use the Ticker Symbol or Company field to search for specific companies one at a time. You can continue to search and add companies one by one to your results.
(3) As you’re likely aware, when you filter in any form with two or more fields, your criteria can work together as AND criteria (i.e., all conditions must be true to have a match) or OR criteria (any condition may be true to have a match). The Reader’s form uses AND criteria. For example, suppose you (1) open the Public Market Capitalization dropdown and choose $9.4 billion and up; (2) open the Revenue dropdown and choose $5.5 billion and up; (3) click Search. The Reader will retrieve only companies which have a market cap of at least $9.4 billion and, at the same time, have revenues of at least $5.5 billion.
If you want to use OR criteria instead, just search for each condition separately. In the example above, open the Public Market Capitalization dropdown, choose $9.4 billion and up, and click Search. Next, open the Revenue dropdown, choose $5.5 billion and up, and click Search. The Reader will retrieve records for all companies with market caps of at least $9.4 billion, as well as any additional companies that don’t have market caps of at least $9.4 billion but do generate revenue of at least $5.5 billion.
(4) Because the tool uses AND criteria, don’t try to search for a specific company and those in a specific industry at the same time. For example, suppose you want to check out compensation data for technology companies, and you want to make sure any particular name say, General Electric — is also included in the company records. You might be tempted to (1) enter General Electric in the Ticker Symbol or Company field (the Reader will display GE General Electric, which you can choose); (2) open the dropdown list for the Industry field and choose Technology; (3) click Search.
This search will return no records, however, because GE is classified in the database as an Electronics company, not a Technology company. In other words, because there are no values where both conditions “-” the company is General Electric and the industry is Technology — are true, no company records are retrieved for this filter.
But again, as with other OR searches, there is an easy workaround: First search for General Electric, then search for Technology companies.
(5) A cool feature on the Summary of Executive Compensation page is a filter for “executive types.” You can screen for CEO’s, CFOs, and all other officers.
One concern I still have is how individual investors may use the compensation data. In my post some months ago I wrote:
“I recognize that no one is telling investors to use executive compensation to the exclusion of all other factors in making investment decisions. But comparing compensation to company and stock performance under a particular management team is a complicated and difficult task, given the trade-offs between achieving long-term company objectives and short-term stock price movements. Institutions and other sophisticated investors have the smarts to use (or ignore) compensation data as they see fit; but I fear some small investors could be lured into making simplistic judgments based on executives total compensation levels.”
Broc Romanek at TheCorporateCounsel.Net echoes these sentiments: “I worry about investors and analysts looking at numbers without the benefits of footnotes, CD&A and other narrative that puts the numbers in contexts.”
Frankly, though, I think the overall goal of demonstrating to investors the potential of interactive data outweighs these concerns. Longer term, XBRL implementations and tools will make deep, wide-ranging, comprehensive investment analysis that much easier to accomplish. Most investors will welcome the Reader and the information it supplies. Practical demonstrations of the uses of XBRL are a valuable means for building support for interactive data, and the Executive Pay Reader is an excellent realization of that effort.