Recent Changes in Execucomp: FAS 123 New reporting requirements

Transcription

1 Recent Changes in Execucomp: FAS 123 New reporting requirements

2 Objective Learn about New ExecuComp content and structure due to the new FASB123 reporting requirements. The changes affect companies with fiscal year end after Dec Hence, for year 2006 not all companies have already reported in the new format (i.e.msft) and the two reporting formats coexist.

3 On ExecuComp Universe: 2,872 companies both active or inactive. S&P 1500 plus companies removed from the index but still trading. Data is collected from each company annual proxy DEF14A, which must be filed 120 days after the company s fiscal year end. How many executives? Up to 9, though most companies only report 5. How are they identified? EXECID is permanent id for each executive through out her career. CO_PER_ROL identifies executive/company combination. Data on executives: Individual characteristics: title, age, gender, date became/left as CEO. Compensation: Salary, Bonus, Restricted Stock Awards, Option Awards, Non Equity Incentive Plan, Deferred Compensation, Pension Plan. Shares Owned. Data on directors compensation (new!).

4 New Reporting Requirements FAS 123 FAS 123 (R) : Equity based compensation has to be expensed and be reflected in the financial statements based on fair value of the awards. Companies with fiscal year end after Dec 2005 have to adjust to new rules. All data available in the past continues to be available; NO info has been purged. DEF14A (SEC doc) is organized in 6 new tables: 1. Summary Compensation: discloses salary, bonus, stock awards, option awards, change in pension value other compensation. Option exercises and Stock vested. 2. Plan Based Table: contains details on option awards, restricted stock awards, and estimated payouts for equity and non equity incentive plans. 3. Outstanding awards Table: information on unexercised options, stock that has not vested and equity incentive plan awards outstanding. 4. Deferred Compensation Table: reports the executive or company contributions, earnings and withdrawals and account balances for the deferral programs. 5. Pension Benefits Table: information regarding each plan of the company that provides payments in connection with retirement. 6. Directors compensation Table: fees, stock and options awards, non equity incentive plan

5 ExecuComp Structure for 2006 fiscal year For year 2006, Execucomp data is delivered in 6 main tables, mapping the original tables in the SEC doc. 1. AnnComp: summary compensation data + other. 2. PlanBasedAwards : Contains data on awarded options and stock grants during the filled fiscal year. 3. OutstandingAwards: Describes the outstanding stock options and unvested stock awards held by officers as of the end of fiscal year. 4. DeferredComp: contains deferred compensation. 5. Pension: contains all details on pension benefits. 6. DirectorComp: contains new details on the director compensation. Prior to 2006, the reporting of stock option grants and long incentive plans are in the following two tables the data goes up to Stgrttab: Stock Options Grants. 2. Ltawdtab: Long Term Incentive Plan Awards.

6 ExecuComp in WRDS The web query now presents the data in several queries: Aggregate compensation items: salary, bonus, total options Disaggregate compensation items: Individual options and preferred stock granted and outstanding. Individual deferred plans. Individual pension plans. Directors compensation. Datasets in WRDS Unix: /wrds/comp/sasdata/execcomp/ All sets provided by Compustat are available, plus the aggregate file created by WRDS.

7 Two Main Questions 1. How are the main aggregated compensation items affected? 2. Stock based compensation: how to identify a unique row. Difference between the aggregated and disaggregated data for restricted stock awards and option awards.

8 1. Old Compensation Items Pre FAS 123: The variables TDC1 & TDC2 were the two most encompassing compensation measures. There is continuity with these measures but the definition has changed slightly. Using the 1992 format: TDC1= Salary +Bonus+ Other Annual + Total Value Restricted Stock granted + Total Value Stock Options granted + Long Term Incentive Payouts + All Other Total Using the 2006 format: TDC1= Salary + Bonus + Non Equity Incentive Plan Compensation + Grant Date Fair Value Stock Awards + Grantdate fair Value of Option Awards + Deferred Compensation + Other Comp.

9 1. New Compensation Items: FAS 123(R) New compensation items are reported by companies. Hence only available from 2006 onwards. TOTAL_SEC, Total Compensation as Reported to SEC: Salary, Bonus, Stock Awards, Option Awards, Non Equity Incentives, Pension and Deferred Compensation Changes, Other Comp. Cost recorded by the company on its income statement. Total_ALT1: same definition as TOTAL_SEC except that stock & options are valued using grant date fair value. Compensation as of grant date. Total_ALT2: same definition as TOTAL_SEC except that stock & options are valued using stock vesting (SHRS_VEST_VAL) and value realized from option exercise (OPT_EXER_VAL). Actual compensation.

10 2. Stock based Compensation Items Firms may grant options and restricted stock several times a year. Hence, this type of compensation is delivered at an aggregated or disaggregated level. Aggregated variables: 1 record per (firm, co_per_rol, year) Disaggregated variables: produce several records for (firm, co_per_rol, year). Need to add ID variable. Before FAS 123: GRNTNUM allows to identify each option grant. FAS 123 : Plan Based Awards table contains all disaggregated data. GRNTNUM applies to all types of awards reported in the table: i.e. shares, equity and non equity incentive plan awards and options. And all of these plans can have several instances.

11 2. Stock based Compensation: Options Stock options awarded during the fiscal year OPTION_AWARDS_BLK_VALUE (before FAS 123) OPTION_AWARDS_FV (FAS 123, i.e. data from 2006 onwards) At company level? Companies do not report all stock options awarded to all employees. From the DEF14A filling can only be computed for executives. Options exercised during the fiscal year: OPT_EXER_NUM & OPT_EXER_VAL Options outstanding: OPT_UNEX_EXER_EST_VAL: Estimated value of in the money unexercised vested options. (OPT_UNEX_EXER_NUM) OPT_UNEX_UNEXER_EST_VAL : Estimated value of in the money unexercised unvested options. (OPT_UNEX_UNEXER_NUM)

12 Aggregated and Individual Options Data Before FAS 123 Data from plus few companies still reporting old format for 2006 fiscal year. Available via Web query. All data items in Execcomp. Aggregated Options data Individual Option data CO_PER_R OL SALARY OPTION_AWA RDS_BLK_VAL UE OPTION_AW ARDS_RPT_ VALUE OPTION_AWA RDS_NUM GRNTN UM NUMSECU R BLKSHVAL EXEC_LNAME YEAR Jaworski Jaworski Whiting Whiting Deranleau Deranleau Deranleau Grewal Grewal 2006 OPTION_AWARDS_NUM: Total number of stock options awarded during the year, as detailed in Plan Based awards. OPTION_AWARDS_BLK_VALUE: Aggregate value of stock options granted during the year valued using S&P Black Scholes Methodology. Applies to 1992 reporting format only. (OPTION_AWARDS_FV for FASB123 reporting) OPTION_AWARDS_RPT_VALUE: Aggregate value for all options granted during fiscal year as valued by company. Applies to 1992 reporting forma t only. GNTNUM: Grant Number Identifier (Stgrttab). NUMSECUR: Number of securities in the option grant. Applies to 1992 only. (Stgrttab). BLKSHVAL: Value of the option grant using the S&P modified Black Scholes Method. Applies to 1992 reporting format only (Stgrttab).

13 Aggregated and Individual Options Data FAS 123 Data for 2006 fiscal year only. Aggregated data available through Web query. Individual option data in Planbasedawards dataset. Details on individual options granted are reported in Plan Based Awards table. Name Grant Date Date Approved by Compensation Committee Estimated Future Payouts Under Equity Incentive Plan Awards (a) Target (#) Maximum (#) All Other Option Awards: Number of Securiti es Underlying Options (#) OPTS_GRT Exercise or Base Price of Option Awards ($/SH) (b) Closing Market Price on Grant Date Grant Date Fair Value of Stock and Opti on Awards FAIR_VALUE H. McGraw III 4/3/06 12/07/05 25,140 50,280 $ 2,906,687 4/3/06 12/07/ ,058 $ $ $ 2,950,673 3/23/06 04/24/ ,637 (c) $ $ $ 3,555,001 R. J. Bahash 3/23/06 04/28/ ,004 (c) $ $ $ 2,138,402 4/3/06 12/07/05 12,233 24,466 $ 1,414,379 D. Sharma 4/3/06 12/07/ 05 46,990 $ $ $ 707,200 4/3/06 12/07/05 7,551 15,102 $ 873,047 4/3/06 12/07/ 05 29,003 $ $ $ 436,495 D. L. Murphy 3/16/06 12/04/ 02 31,771 (c) $ $ $ 423,225 4/3/06 12/07/05 7,551 15,102 $ 873,047 4/3/06 12/07/ 05 29,003 $ $ $ 436,495 K. M. Vittor 3/14/06 04/30/ 03 17,799 (c) $ $ $ 225,857 4/3/06 12/07/05 6,872 13,744 $ 794,541 B. D. Marcus 4/3/06 12/07/ 05 26,395 $ $ $ 397,245 4/3/06 12/07/05 3,460 6,920 $ 400,045 4/3/06 12/07/ 05 13,289 $ $ $ 199,999 GRNT_NUM: Identifies entry in table. Hence it can refer to any Equity and non equity plan! No longer count for number of options grants. When OPTS_GRT > 0, then entry corresponds to option grant. OPTS_GRT: Number of stock options granted Fair_Value: Grant date Fair value of stock and option Awards. SUM(OPTS_GRT)= OPTIONS_AWARDS_NUM Total number of stock options awarded during the year. SUM(FAIR_VALUE)= OPTIONS_AWARDS_FV Aggregate value of stock options granted during the year.

14 2. Stock Based Compensation: Restricted Stock Restricted Stock awarded during the fiscal year RSTKGRNT (before FAS 123, only applies for 1992 format) STOCK_AWARDS_FV (FAS 123, i.e. data from 2006 onwards) Stock vested during the fiscal year: SHRS_VEST_NUM & SHRS_VEST_VAL Restricted Stock Outstanding : STOCK_UNVEST_VAL : Aggregate market value of restricted shares held by executive (STOCK_UNVEST_NUM) All details on the stock awarded is contained in the Plan based table.