TD Ameritrade blames the fine print…

November 28, 2011

As footnoted regulars know, we look at a lot of filings. Day in, day out, thousands of words are filed electronically at the SEC. Much of the stuff that we read (ok, skim) works better than Ambien. But every now and then, a disclosure practically jumps off the page.

That’s exactly what happened when we read the 8-K that TD Ameritrade (AMTD) filed at 4:15 p.m. on November 23, the day before Thanksgiving. As regulatory filings go, this one was short and sweet:

“Under the terms of the management incentive plan of TD Ameritrade Holding Corporation, for fiscal year 2012, the base salary of Fredric J. Tomczyk, president and chief executive officer of TD Ameritrade, was increased by $200,000 to $700,000, and his annual incentive target was increased by $100,000 to $5,600,000. Mr. Tomczyk’s annual incentive continues to be comprised of 30% cash and 70% equity.”

You don’t need a super-computer capable of high-frequency trading to calculate that that’s a 40% raise, which seems kind of rare to us these days. Granted, in its quarterly slideshow, the company noted that its assets and revenues are up over prior periods. But that may be cold comfort to Ameritrade’s shareholders, who have weathered a 20% decline in the stock’s price this year.

It seemed to us a rather convenient excuse to blame the 40% hike on the “terms of the management incentive plan,” as if the directors who sit on the Compensation Committee are simply being forced into doing something against their will by a piece of paper. But that’s not exactly the case.

We dug through Ameritrade’s January 7, 2011 proxy to peruse the terms that may have impacted the decision reflected in the 8-K, and it doesn’t appear quite as set in stone as one might first assume. In fact, on the same page where it says that the Management Incentive Plan awards are limited to a maximum of $20 million per person per performance period (p. 52), the filing also says: “The Compensation Committee has discretion to reduce or eliminate the actual award of any participant.”

Thus, in this case, it appears that the Compensation Committee is doing what it wanted to do, not what it had to do. Of course, Tomczyk will have an easier time getting by until the stock price recovers, thanks to the boost to his salary and bonus. But shareholders, it looks like you’re on your own.

Image source: arturodonate via flickr

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