April 4, 2006
Ms. Nancy M. Morris
Securities and Exchange Commission
100 F. Street NE
Washington, D.C, 20549-9303
Dear Ms. Morris,
I think the plain text proposal for the proxy is great. Proxies stand alone in all of a companys communications with shareholders as the most difficult document to read and understand. The footnotes alone run on for pages. As an Investor, I often times get the feeling companies are trying to hide financial details (rather than explain) and unfortunately, this is often the case.
Plain text has been used successfully in insurance policies for years and there is no reason why this cant be done in a proxy. I think most of the discussion on executive compensation can be distilled down to: what did I the shareholder get versus what did the management get?
Knowing how management performed is a critical piece of information. The performance chart now in the proxy tells shareholders not only what their return over the last five years has been but also how the company did in relation to competitors. I think this is important information. An investor needs, this comparison to judge managements effectiveness.
Requiring a discussion of this information would be most helpful to investors. Management often times paints a flattering view of company performance in the annual report and rarely, if ever, compares its performance to that of others in its industry. The investor needs to know how the track record of management stacks up against others in the industry.
Mutual funds have their performance ranked against other funds in their category. This gives the investor a valuable piece of information in addition to the return of the fund. We need this relative performance comparison if we are to judge company performance. A plain text discussion of the relative performance of the company versus its competitors would be very helpful addition to the proxy.
Essentially this boils down to: did investors get above average performance or not and what did it cost them? That is the information we need. Right now all shareholders get is the relative comparison in the performance chart which is barely adequate. This chart and the underlying information needs to be expanded if we are going to make an intelligent decision on management pay.