Good disclosure, or bad disclosure: you decide!
Every now and then, I come across a disclosure that strikes me as being pretty unique, which, given how long I’ve been reading SEC filings, is definitely worth paying attention to.
That was the case when I read this 8-K filed by Church & Dwight (ticker: CHD) last Friday evening just after 4:30 pm. In a nutshell, the company decided to take away $200,000 in-the-money options from one of its executives because that executive failed to cooperate in an unidentified legal matter.
The filing identified the executive as Chief Marketing Officer and President of its Consumer Domestic division Barry A. Bruno and said that Bruno “failed to fully comply with respect to text messages on his personal mobile device” and that after recovering “a significant number of the deleted communications that were within the scope of the Company’s instructions” decided to penalize Bruno by making him forfeit the $200K award.
Trust me on this: this type of detail is incredibly rare, especially since Bruno remains an executive at the company. It’s also fair to argue that given Church & Dwight’s size — roughly $22B in market cap — reducing a single executive’s pay by $200K doesn’t seem to meet the materiality test. And, yet, someone at Church & Dwight, or perhaps several folks, decided to disclose this via a Friday afternoon 8-K.
On the one hand, it’s tempting to ding the company for keeping an executive around who clearly wasn’t willing to cooperate with a legal investigation. On the other hand, it’s tempting to hand them an incredibly rare footnoted* Gold Star for disclosing this type of thing at all.
So you be the judge: was this good disclosure or bad disclosure? Looking forward to seeing some of your comments below.
A version of this post originally went out to subscribers of my Friday Night Dump newsletter, a subscription-only product that highlights 6-10 filings made after 4 pm on Fridays, when companies tend to bury their most negative information. You can learn more about subscribing here.