March 10, 2008
A Plug (Sort of) for XBRL
The SEC has expended a lot of effort in promoting XBRL (extensible business reporting language), which essentially codes data within electronic SEC filings so that the data can be searched and analyzed more easily. The SEC even invites software engineers to download the source code. Paul Schott Stevens, President and Chief Executive Officer of the Investment Company Institute, gushes that XBRL can "put investors in the driver’s seat by facilitating automated search, retrieval and analysis of tagged data. By enabling investors and others to manipulate data, to perform analysis and comparisons, and to drill down deeper into layers of information, interactive data can truly increase the value of information made available to the public."
While I am skpetical that many investors will have the patience and economic justification to use XBRL regularly, it has the potential to be a useful tool for sophisticated institutional investors. Ideally, investors concerned with executive compensation at a portfolio company, for example, could easily compare the company's pay packages with other companies of similar size within the same industry. The problem is that while XBRL is useful, it is voluntary, and so there are limited comparables. Let's say that you are worried about the pay of Tim and Gert Boyle at Columbia Sportswear. A couple of selections from a drop-down menu (market cap: up to 9.5 billion; Industry: Apparel), and you'll see that Tim and Gert are paid significantly less than their equivalents at Jones New York and Liz Claibourne. Of course, those companies both have market caps of $3.5 billion and revenues approaching $5 billion, while Columbia is a $600 million company, and has revenues of $1.2 billion. Alas, there are as yet no other comparables.
Posted by: Paul Rose