Julie Chen avoids the Katie Couric rule…
One of the things that’s always fascinating to me is how different companies in the same industry handle routine disclosures on various things like perks, or salary, or related party transactions — basically things they’d rather not talk about, but which they’re required to by the SEC.
Take the proxy filed by CBS Corp. (CBSA) late Friday and their disclosure on Julie Chen, who happens to be married to CBS CEO Leslie Moonves:
Julie Chen, the wife of Mr. Moonves, is an anchor on CBS Networks’ The Early Show and the host of the CBS Network show Big Brother. Ms. Chen’s compensation is comparable to talent in similar positions at the CBS Network, and the Company believes it is comparable to entertainment talent in such positions generally.
That’s the same exact disclosure from last year, at a time when many companies are providing a lot more details on this sort of thing. Essentially, CBS is acknowledging this as a related party transaction, but refusing to provide any details on Chen’s salary, perks, or even the length of her contract that would help investors gain a better understanding of the related party transaction.
Now compare that to Disney (DIS), which given its ownership of competing network ABC, makes for a pretty good comp. In their proxy filed back in January, they disclose the full details of a relationship between a board member, whose wife happens to work for Lifetime Entertainment, a network that is only 50% owned by Disney:
Director John Bryson’s wife, Louise Bryson, serves as President—Distribution and Affiliate Business Development for Lifetime Entertainment Television, a cable television programming service in which the Company has an indirect 50% equity interest. Ms. Bryson received an aggregate salary (including car allowance and payments of deferred compensation) of $602,023 for her services with Lifetime during fiscal 2007 and received a bonus of $431,091 in fiscal 2007 with respect to her services in fiscal 2006
Clearly, the former is a lot more related party-esque than the latter. Perhaps, it’s because Disney learned a lesson from the mess a few years ago.
But for CBS, it’s a good thing that the so-called Katie Couric rule was not put in place by the SEC.
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April 14th, 2008 at 11:31 am
I think the “Katie Couric” rule was related to the disclosure of the top paid non-management “talent” from being disclosed in the executive compensation tables in the proxy just because they made more than the top executives at the company. It doesn’t relate to the related party disclosures, and after a quick look at the rules again, I’m really not sure how CBS justifies leaving the specifics out of their related party disclosures (assuming Chen makes more than $120,000 - and I think that’s a safe assumption).
April 14th, 2008 at 1:53 pm
Yes, CP, you’re correct. Sorry if that wasn’t clear from my post. The Katie Couric rule would have required disclosing the top three highest paid people, even if they weren’t NEOs, and had nothing to do with related party transactions. Even if the SEC had moved forward on the rule, it’s unlikely that Chen would have been covered by it, since I doubt she’s in the top 3. Still, it seems as if the rules on related party transactions should apply here.
BTW — the folks over at Silicon Alley Insider have their own interesting take on CBS here.
April 15th, 2008 at 10:51 am
I don’t see how the disclosure regarding Louise Bryson could possibly be material to an investor’s decision to buy or sell Disney stock. Disney had revenue of $35.5 billion in ‘07, operating income of $7.7 billion and net of $4.6 billion. Disclosing that a related party was paid $1 million versus disclosing that a related party was paid “market” is not more helpful to investors. In both cases, the issuer is confirming that a related party transaction exists, but is not material. Your implication that the Disney disclosure is more helpful to investors is mystifying. All that disclosure accomplishes is to (i) waste ink, paper and time and (ii) keep regulators and bloggers fully employed.
April 15th, 2008 at 11:05 am
Whether or not something is material is besides the point: the SEC rules on related party transactions are pretty clear and require that the dollar value be disclosed if it’s over $120K. So my post had to deal with the fact that Disney followed the rules while CBS did not.
April 16th, 2008 at 2:10 pm
I disagree. You state that CBS refused to provide information “that would help investors gain a better understanding of the related party transaction.” Implicit in that statement is that investors care about those details (i.e. those details are material), which clearly is not the case. If you had said CBS refused to provide information “that the SEC requires under S-K,” then fine.
April 16th, 2008 at 2:52 pm
It’s hard to say what investors care about and some — maybe even all — may not care about this at all. My point is that there’s a pretty clear SEC rule on what needs to be disclosed and CBS isn’t doing that here. Whether that’s material or not is up to someone else to judge. At footnoted, we simply point things out that we find in SEC filings, or in this case, omissions that seem odd to us.