Shareholders, watch your language…

February 4, 2010

If you read enough SEC filings, you begin to recognize certain sections like they’re old friends. You might think, —Oh! There’s the section on Executive Compensation Discussion & Analysis! or —Hi, Forward-Looking Statements. How are the Risk Factors looking today?

But occasionally — perhaps rarely — something pops out that you—ve never noticed before.

Such was the case when we read the proxy statement that vitamin and nutritional supplement producer NBTY, Inc. (NTY) filed recently. At the top of page 10, a passage in the —Communications to Directors section gave us pause:

——After the mail is opened and screened for security purposes, it will be logged in, and (other than mail that our General Counsel determines to be trivial or obscene) then forwarded to the particular Director identified, or to the Board as a whole, as requested in the stockholder’s correspondence. Trivial items will be delivered to the Directors at the next scheduled Board meeting. Obscene items will not be forwarded.

Really? Do the directors receive a lot of obscenity-laced mail, or is this just one of those boilerplate sections that legal counsel adds to protect the directors just in case the company ever receives an abusive letter that — if read aloud — would turn the air in the board room blue?

Frankly, we expected to find out that it was boilerplate. But it turns out that a search on variations of the paragraph above yielded only NBTY, Inc., which has included similar language in its proxy every year since 2004.

[As an aside, one might understand shareholder concern — if not ire — at some of the disclosures in the proxy. For example, in the Related Transactions section on p. 31, we noticed that in FY 2009, six family members of two of the top executives received either commissions or —aggregate compensation and fringe benefits ranging from just under $500,000 to $1.5 million.]

Now we’re curious, though. To those of you who see or receive letters from shareholders, is obscene mail addressed to the company’s directors or top executives really a problem? Feel free to discuss— politely, of course.

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