Non-disclosure disclosure at The Travelers?

December 14, 2009

Last week, The Travelers (TRV) named veteran executive Donald J. Shepard to its board of directors, according to this 8-K filed late Friday. Snore city, right? After all, even at large companies, director changes are hard to get all that worked up about.

What piqued our interest was the lack of detail in the 8-K. Here’s what Traveler’s disclosed:

On December 9, 2009, the Board of Directors of The Travelers Companies, Inc. (Travelers) elected Donald J. Shepard as a director. Mr. Shepard has also been appointed as a member of the Compensation and Nominating and Governance Committees of the Board of Directors. Mr. Shepard is the former chairman of the executive board and chief executive officer of AEGON N.V.

While there’s nothing factually incorrect there, it leaves out some key details about Shepard, including the fact that he also sits on the boards of CSX Corp. (CSX), which like Travelers, is one of 65 companies in the Dow Jones Composite, as well as PNC Financial (PNC). From CSX’s proxy, we also learn that Shepard is on the board of directors for the US Chamber of Commerce and a trustee of Johns Hopkins Medicine and Johns Hopkins University. From PNC’s proxy, we learn that Shepard sits on both the Audit Committee and the Risk Committees.

It’s not clear whether the Chamber post is a paid position, but between CSX and PNC, Shepard’s comp as a director was around $400K last year. Director compensation at The Travelers runs around $215K a year. But wait — there’s more! A very quick search of N-PX filings, which mutual funds are required to file, shows that Shepard also sits on the boards of directors of lots of funds, including Franklin Value Investors and Goldman Sachs Trust. We actually stopped counting when we got to 20!

We don’t mean to single Shepard out here. Given that he is retired, maybe he really is talented enough to juggle all of these different board responsibilities. But at the very least, doesn’t Travelers have an obligation to disclose at least some of Shepard’s other responsibilities? After all, one shouldn’t have to spend precious time digging through the proxy statements (and other filings) of other companies to get a basic biographical sketch.

What’s even more disturbing is that when you see this sort of behavior going on at the very largest of companies — Travelers is in the select group of just 30 companies in the Dow Index — you have to wonder what kind of message it sends to the thousands of other publicly traded companies out there. What’s that message? That non-disclosure disclosure is A-OK!

UPDATE 12/15: After being contacted by The Travelers, we have deleted the part about Shepard sitting on the boards of at least 20 mutual funds. After doing more in-depth research, we realized that we were reading the N-PX forms incorrectly and that Shepard’s name turned up in the fund’s filings because of his role on the boards of both CSX and PNC. We apologize for the error. We also asked Travelers spokesman Shane Boyd why the company chose not to include Shepard’s other board memberships in the 8K and he said the filing met both the “technical requirements and spirit” of disclosure rules.

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