IF YOU’RE looking for an example of a plain English compensation discussion and analysis, take a look at IBM’s effort.
Running this rather lengthy report through the Juicy Studio Readability Tester, it still scores better than any of the CD&A’s in our recent survey of 40 early proxy statements.
Here are its core results:
Gunning Fog Index
13.35
(This should be below 12, but it’s still better than all of the CD&As in our earlier testing, where the average was a dismal 16.45. The worst possible score on this measure is 17.)
Flesch Reading Ease
47.72
(Between 50 and 60 is thought to be the target for this measure. Again, IBM’s is better than any of the results we’ve published thus far.)
Flesch-Kincaid Grade
9.02
(This is about right. You know, though, using the word “pay” instead of only using “compensation” would help IBM and a lot of other companies get their grade levels in the right zone.)
Optimized for on-screen viewing
So it is possible to write these things plainly. Of course, these results don’t tell you if the disclosure is complete or accurate, and readability tests like this are only a rough guide.
They also don’t give IBM credit for optimizing its CD&A — indeed its entire proxy statement — for online viewing and use. Notice the good use of charts and tables, clear headings and bullet points.
If you’re thinking about using the SEC’s e-proxy process next year, take a look at how IBM handles its annual shareholder materials on its investor relations website.
However, if I compare what IBM is doing on its IR website to what the leading companies in our survey are doing, IBM still has lots of room to grow.
Dominic (bio & disclosures) is IR Web Report‘s founder and an online investor relations consultant. He advises leading public companies and investor relations service providers worldwide on using the web for disclosure, engagement and profile building. You can contact him via the contacts page.
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