I am in the process of relocating my home office from the dining room to a bedroom, so today’s post will be sorta short. Fortunately, there is a development in the papers worth a brief note. Today, the Wall Street Journal reported that it is likely that the SEC will withdrew a proposed rule that would have required companies to disclose the compensation of up to three non-management employees, if they are paid more than management. This proposal became called the “Katie Couric clause” for obvious reasons.
This seems like a bad thing. Admittedly, the principal reason for disclosing employee comp is to make sure that management is not ripping off the shareholders. But, there is another reason. As I have been arguing, investors in the new economy need a variety of non-traditional information to evaluate a company. Mega-star employees like Katie Couric and Howard Stern are key resources. The value of these resources depend upon what they cost. Hence, this comp info would be very useful to investors.
Shawn, in a comment, said that Generally Accepted Accounting Principles (GAAP) are satisfactory to compare apples to apples. That is not the case in the new economy. For example, during the tech bubble, GAAP was unable to distinguish a winner high-tech start-up from a loser. Here is another.
For more, let me give you a link to my favorite accounting blog AAO Weblog