Never a disagreement in SEC filings land…

January 20, 2012

Here at footnoted, we’re constantly trying to figure out what companies — or at least their attorneys — are really trying to say when they file something with the SEC. While these filings are ostensibly meant to inform investors about significant events or issues that should be taken into account, by the time they make it into Edgar, they’re often so watered down that what you’re left with is boring boilerplate.

We were reminded of that when we read this 8-K that Yahoo (YHOO) filed yesterday presumably to inform the two investors who hadn’t already heard that co-founder Jerry Yang had resigned. Attached to the filing was Yang’s resignation letter, which many of our friends in the media picked up on (see here and here among others).

Being the SEC filings geeks that we are, we were more interested in the Item 5.02 disclosure, which reads:

Effective January 17, 2012, Jerry Yang resigned from the Board of Directors of Yahoo! Inc. (the —Company) and all other positions with the Company. Mr. Yang is resigning to pursue other interests, and not due to any disagreement with the Company on any matter related to the Company’s operations, policies or practices.

We don’t know Jerry Yang and we’re certainly not experts on Yahoo, but we have read an article (or 15) about the many disagreements Yang has had over the years — with board members, investors, potential suitors, etc. Indeed, Forbes’ Eric Savitz, who has spent years covering the company, described the resignation as Yang “losing his battle”. So the idea that Yahoo could legitimately claim in a filing that this was not due to “any disagreement” kind of reminded us of Bill Clinton’s tortured use of the word “is” back in 1998.

Given that Yang’s problems have been well documented over the years and that the company still decided to use the boilerplate “no disagreements” language, we were curious to see how many other companies use this language when their decidedly less high-profile executives resign. So we did a search for every time that language was used in an Item 5.02 disclosure in an 8-K. The answer? 1,754 times in the past year!

We won’t admit to reading all of those disclosures so perhaps there were some companies that did admit to having some sort of disagreement as they informed investors about some executive or director being ushered out the door. But we’re quite confident that the overwhelming majority of those disclosures — probably well over 95% — undoubtedly claimed that there was no disagreement.

We know that Jerry Yang had many disagreements while at Yahoo. And yet Yahoo was still able to claim that his resignation wasn’t due to “any disagreement”. So what does that say for those 1,754 other folks who also resigned from various public companies in the past year?

Indeed, it kind of reminds us of that famous Garrison Keillor quote about all the children being “above average” in Lake Wobegon. In SEC filings, apparently, departing executives and directors rarely seem to leave because of a disagreement. Which makes the very nature of this disclosure something of a joke.

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On Wednesday, we published the 2012 footnotedPro M&A report, listing 10 companies we believe are likely acquisition targets. Three companies on last year’s Top 10 list announced deals within a little over three months. For more information about our 2012 M&A report, or to inquire about subscribing to footnotedPro, please contact us.

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