Unearthing Corporate Secrets

By Kelly Carr
March 4, 2008 04:07 PM

A sort of corporate detective, Michelle Leder has made it her day job to piece together information that companies would rather slip under the radar.

“What companies tend to do is bury stuff. They bury things and hope no one will have the energy to find them,” Leder said. “Companies will change their risk factors around and add some additional footnotes. There is too much information and they are hoping you don’t find things.”

But with Leder’s help, you can find those deep, dark corporate secrets. The freelance journalist and founder of footnoted.org said she scours through Securities and Exchange Commission paperwork on a daily basis, paying close attention to filing trends and footnotes. She knows where to look and she’s sharing the knowledge.

Leder gave me her top tips for digging through SEC filings and taking coverage deeper.

• Start with the SEC Web site (www.sec.gov). As a business reporter, it’s your job to find the secrets in the information a company must disclose. Best bet is to start digging through SEC filings. All publicly-traded companies, all private companies that have public debt offerings and companies that are planning to go public must file with the SEC. Take some time to make yourself familiar with the site and the documents related to a specific company. The paperwork may seem daunting at first, but before you know it, you’ll be able to spot tiny gems of data that could lead to a big story.
  


• Follow the breadcrumbs. Pay attention to unique filing activity.  Has the company filed lots of 8-Ks, the document that is required for any material event? Are there new disclosures in routine filings? Has the company filed anything late on a Friday or before a holiday weekend?
  


• 10-K and 10-Q. Leder says the 10-K is one of the most important documents in a business reporter’s toolbox. It comes out 60-75 days after the end of the fiscal year. Pay close attention to sections 1, 2, 3 and 8. Also check out the exhibits, which are at the end. The 10-Q is a quarterly earnings release, but Leder says companies often use this statement to disclose other important details. It is filed 40 days after the close of the quarter, and it may have new disclosures and voting results.
  


• Compensation. Last year the SEC asked companies to provide total compensation numbers. This means they are now requiring companies to add up all the columns and say here’s what John Doe made in 2007. But the total figure could include some usual accounting, so be careful as you try to distinguish exactly what top executives are making.
  


• Perks. Wondering if a CEO used the corporate jet for more than regular business travel? Or trying to discern what perks a company is handing out to directors? You can often find this information in Proxy statements. Look under “All Other Compensation.”
  


• S-1. Filed when a company plans to go public, the S-1 can have juicy details on competitors and are often a first look at the financials of a private company.
  


• Comings and Goings. Companies are required to disclose when a top executive, director and accounting firm leaves. These types of moves usually require an 8-K and can often be a sign to start digging deeper.
  


• Comment letters. The SEC releases comment and response letters related to disclosure filings. Comment letters are usually an exchange of communication between the company and the SEC. 

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Copyright © 2008 Donald W. Reynolds National Center for Business Journalism