A lot of us like a good mystery, but most of us probably prefer the ones in a book to those in an SEC filing.

When we looked at the 10-K that Forestar Group Inc. (FOR) filed yesterday, we noticed an interesting example that illustrates an important point:  Shareholders need transparency and full disclosure in SEC filings.  And when that’s lacking, they can’t know whether the company’s executives are running the company with everyone’s interests in mind, or just their own.

On page 31, in the 2009 section under the heading “Significant aspects of our results of operations follow”, we found the following:

General and administrative expense includes about $3,200,000 paid to outside advisors regarding an evaluation by our Board of Directors of an unsolicited shareholder proposal and $2,213,000 in non-cash impairment charges related to our undivided 15 percent interest in corporate aircraft contributed to us by Temple-Inland at spin-off. Other general and administrative expenses have declined as result of execution of our near-term strategic initiatives to lower costs.

Admittedly, this is not the kind of mystery that involves deep secrets like “Who killed J.R.?”  However, we – and therefore perhaps shareholders – found ourselves wondering:  “$3.2 million to outside advisors?  Who are they? Do these advisors have a connection to anyone at the company?  Or, at a minimum, what kind of advisors are they?  What is the general nature of this ‘unsolicited shareholder proposal’?”  Was this a lame shareholder proposal, or something that really required a lot of due diligence and time to consider?

Another sentence or two to provide some context could have easily answered these questions.

When we researched the point, we discovered that Forestar actually first disclosed this expense in an 8-K filed last May.  But in the handful of documents that refer to the expense which the company has filed since then, it always uses the same phrase, with no further detail.

We understand that companies can’t reveal information that would jeopardize their competitive edge.  However, if a matter doesn’t fall into that category – as this one presumably doesn’t, since it was a shareholder proposal – then companies could use their filings as an opportunity to reassure shareholders that they value transparency and are working with their interests in mind.

So, sadly, in this case we can’t tell you Whodunnit.  Nor can we tell you why.

Update: a valued footnoted reader, Steven Friedman, gets the coveted “Sam Spade for the Day” award for helping us solve the mystery.  Thank you for helping us, Steven!  He writes:

this was the takeover offer last year. http://uk.reuters.com/article/idUKN2330853720090123

Offer was at $15 and stock is higher now so the defense money was probably good ROI for shareholder. The private jet on the other hand….oh well

Image source:  National Geographic

In addition to the exciting news reported yesterday about Dominos Pizza, Inc.’s (DPZ) impressive profits, the company also released information about deals with two top executives.

On March 8th, J. Patrick Doyle will replace David Brandon as President and CEO. And as Doyle’s employment agreement shows, (filed yesterday as an exhibit to Dominos’ annual report), the company is investing a lot in its new leader.

The contract runs for three years and starts with a base salary of $750,000 a year. But Doyle may earn as much as another $1.5 million in the form of a bonus if the company meets the targets set out in the Senior Executive Annual Incentive Plan. The company also gave him stock options to purchase 250,000 shares and a performance share award (which vests over three years) of 75,000 shares of stock.

And then there’s the plane. Section 4.7.3 (bottom of p. 4) starts by saying:

The Company acknowledges its obligation to furnish the Executive (which for purposes of this Sub-Section 4.7.3 includes the Executive’s spouse, family and guests when accompanying him), with transportation during the term hereof that provides him with security to address bona fide business-oriented security concerns, and shall, at the Company’s expense, make available to the Executive, Company or other private aircraft for business and personal use at his discretion, provided that any such personal use shall be limited to thirty-five (35) hours per calendar year (the “Yearly Aircraft Hours”).

The 35-hour limit is invoked again in the Time Sharing Agreement that gives Doyle the right to use Dominos’ Dassault Falcon 2000.  (His contract also provides for a gross-up benefit, which means Dominos will pay any taxes that Doyle would otherwise owe personally.)

But while the parties may intend to invoke that 35-hour limit, we noticed an ambiguity that arguably gives Doyle unlimited personal use of the plane. That’s because the agreement also says:

It is recognized that travel by the Executive on Company or other private aircraft is required for security purposes and, as such, all uses by the Executive shall constitute business use of the aircraft and shall not be subject to reimbursement by the Executive.

Meanwhile, David Brandon, the departing CEO, will remain on the Dominos payroll for a while.  For starters, even though he’s turning over the reins to Doyle next Monday, he’ll earn his regular base salary of $70,621.83 for the month of March (the calculation comes from the 2009 proxy). After that, he’ll earn $25,000 per month in the newly created role of “Special Advisor to the President and Chief Executive Officer”, a position that will last through January 10, 2011. He will also continue to participate in the Annual Incentive Plan, and he keeps the right to use his “Yearly Aircraft Hours” on the company’s plane through the end of FY 2011, or until he stops serving on Dominos’ board.

Brandon’s next career will be as the Director of Intercollegiate Athletics at the University of Michigan, where he will reportedly earn a base salary of $525,000 and $100,000 a year in deferred compensation. While that’s certainly a significant pay cut, when combined with his new gig as an advisor to Doyle, he will still probably have enough to treat the kids at Michigan to an occasional pizza.

Image source:  Culinet

Gas prices may be much lower than they were during the summer of 2008, when they were approaching $5 a gallon in many parts of the country. But we couldn’t help but think about gas prices as we dipped into the 10-K that Exxon Mobil (XOM) filed on Friday.

In the filing, which was significantly longer than the 2008 10-K, the company disclosed that total compensation for one of its directors was over $600,000 in 2009. Eight other directors collected more than $300,000 and two received a little less than $250K.  Kenneth Frazier, Merck’s Executive Vice President of Global Human Health and a new bee to Exxon’s Board of Directors last year, made the most: $614,283, though to be fair, the bulk of that was in stock awards as opposed to cash compensation. While the other 10 directors took home $201,263 in stock awards, Frazier’s award was valued at $554,280. The footnotes reveal Frazier received a one-time grant of 8,000 restricted shares upon being first elected to the Board in May 2009. The valuation of this award is based on a market price of $69.29 on the date of grant, which is actually higher than Exxon stock is currently trading at.

Our find on Exxon’s director pay was just one of a few gems buried in last weeks’ filings. Other companies that fueled up their director’s pay in 2009 were Baker Hughes (BHI), Brocade Communications (BRCD) and Arkansas Best (ABFS). Directors at Brocade and Baker Hughes received more than $200K, while Robert Young of Arkansas Best pocketed $280K. Young’s perquisite value included personal use of the company’s aircraft and a hunting lodge, an administrative assistant, a nominal gift related to business activities and a Christmas gift from the Company.

This post was written by footnoted intern Kristen Scholer, who is a junior at Northwestern University.

Today’s the deadline for the many companies that are on a calendar year to get their 10Ks in to the SEC, and the folks here at footnoted couldn’t be happier. We won’t bore you with how we spent our respective weekends combing through over 900 alerts to assemble a hefty spreadsheet of all the different things that companies tried to dump in these filings, some of which topped over 1,600 pages! We’ll be sharing our best finds with subscribers to FootnotedPro.

But we thought the 10-K filed by Xerox (XRX) late Friday was a good one to talk about here for several reasons. For one, we’ve been pretty skeptical about the recently approved acquisition of Affiliated Computer Services (old ticker: ACS), which Xerox promises will expand its reach in the business process and document management markets. Yet, there is some positive news. For example, Xerox obtained 16% more patents in 2009 than in 2008. And this article points out that Xerox reported a 4Q 2009 profit of $180 million (although it adds that “the improvement was driven entirely by [its] success in paring its costs”).

If you look deeper, though, you might just end up with that annoyed feeling you get when the photocopier jams, you get toner all over your hands, and you still can’t find the crumpled paper that’s supposedly hiding in “Section B” of the machine.

The biggest annoyance comes from page 29. Here’s a snippet from the paragraph about the Annual Performance Incentive Plan, or “APIP”:

The Compensation Committee approved the payments of cash awards under the Xerox 2004 Performance Incentive Plan (“2004 PIP”), as amended, for the second half of 2009 APIP. The Compensation Committee had previously approved the awards for the first half of 2009 at its July 2009 meeting…. The Compensation Committee approved a second half 2009 cash award of $1,181,250 to [CEO Ursula] Burns, $1,093,750 to [Chairman of the Board Anne] Mulcahy, $624,750 to [Vice Chairman/CFO Lawrence] Zimmerman, $624,750 to [EVP & President, Corp. Operations James] Firestone, and $491,417 to [Sr. VP & President, Developing Markets Operations Jean-Noel] Machon.  These awards, combined with previously approved cash awards for the first half of 2009, result in combined cash awards of $1,884,375 to Ms. Burns, $2,331,250 to Mrs. Mulcahy, $1,071,000 to Mr. Zimmerman, $1,071,000 to Mr. Firestone, and $842,428 to Mr. Machon for full fiscal 2009.

Although the company “explains” the awards by referring to this exhibit, handing out millions of dollars seems inconsistent when viewed in the context of what else is going on. For example, we’re guessing that those types of bonuses won’t sit too well with the 2,500 folks that Xerox plans to lay off.

This article points out that Xerox – which is trying “to reverse five straight quarters of sales declines” – bought Affiliated Computer Services to help boost its revenues.  And this report stated that after the ACS acquisition, S&P lowered Xerox’s ratings to BBB-, one notch above junk status.  It also cited an analyst who said that Xerox is “vulnerable to macroeconomic conditions, as demonstrated by the sharp drop in equipment sales in 2009.”

But what about the fact that the stock is trading about 80 percent higher than it sold for one year ago? Well, that might seem less impressive after looking at p. 27 of the annual report, where Xerox includes a graph that shows what a $100 investment made on December 31, 2004 would be worth five years later. A hundred dollars invested in the S&P 500 Information Technology Index would have been worth $117.11. A hundred dollars invested in the S&P 500 Index would have been worth $102.11. And a hundred dollars in Xerox? Five years later, it would have been worth $51.97.

Image source:  Xerox