March 29, 2018

Did Some Companies Fudge Their Compensation Numbers in Reports to the SEC?

Public Citizen Asks the SEC to Check the Math

WASHINGTON, D.C. – Very similar companies are reporting dramatically different compensation numbers, pay ratios and median salaries to the U.S. Securities and Exchange Commission (SEC), and there does not appear to be any explanation for the discrepancies, Public Citizen pointed out in a letter (PDF) sent to the agency today. Public Citizen is asking the SEC’s Division of Corporation Finance to investigate these unexplained discrepancies and take appropriate steps to rectify them.

The letter documents a number of irregularities and inconsistencies in the reported data, highlighting dramatically different reported figures from similar companies in the same industries – companies that have nearly identical business models, numbers of employees and compensation structures. As this is the first time such data has been collected and made available to the public thanks to the SEC’s new pay ratio disclosure rule, Public Citizen is encouraging the division “to exercise appropriate diligence in oversight of this important new disclosure.”

“President Ronald Reagan famously said ‘trust but verify,’ and that’s all we’re asking the SEC to do,” said Bartlett Naylor, financial policy advocate for Public Citizen’s Congress Watch division and author of the letter. “It’s possible that there are reasonable explanations for the discrepancies we found, but it’s also possible that some of the companies fudged their numbers or reported bogus data to mislead the public. The SEC should check the math so we know for sure.”

Among the irregularities Public Citizen flagged in the letter:

  • Citigroup told the SEC that its CEO received $17.8 million in compensation instead of the $23 million in total compensation the company reported in its proxy statement;
  • Citigroup and Bank of America, very similar companies, reported wildly divergent median pay numbers, and it is not clear why;
  • Verizon and AT&T, also very similar companies, reported wildly divergent median pay numbers, and it is not clear why; and
  • GEO Corp., which owns and operates private prisons, reported data that did not reflect its extensive use of paid inmate labor.

“In some cases, the appropriate remedy may be asking a company to explain and justify to the public its unusual employment and compensation circumstances. In other cases, the SEC should ask companies to correct misleading or inaccurately reported data,” Naylor added. “The pay ratio disclosure requirement is a brand new rule and this the first time companies are reporting their compensation data to the public. As a matter of due diligence, the SEC should apply a little extra scrutiny to make sure companies are complying with the rule and accurately representing their compensation data.”