sec-proxy-analysis

SEC Proxy Analysis

Analyze proxy statements (DEF 14A) to extract executive compensation and governance information for public companies using the Octagon MCP server.

Prerequisites

Ensure Octagon MCP is configured in your AI agent (Cursor, Claude Desktop, Windsurf, etc.). See references/mcp-setup.md for installation instructions.

Workflow

1. Identify Analysis Parameters

Determine the following before querying:

• Ticker: Stock symbol (e.g., AAPL, MSFT, GOOGL)
• Focus Area (optional): Compensation, governance, proposals
• Comparison (optional): Peer companies, prior years

2. Execute Query via Octagon MCP

Use the octagon-agent tool with a natural language prompt:

Extract executive compensation details and governance information from <TICKER>'s latest proxy statement.

MCP Call Format:

{
  "server": "octagon-mcp",
  "toolName": "octagon-agent",
  "arguments": {
    "prompt": "Extract executive compensation details and governance information from TSLA's latest proxy statement."
  }
}

3. Expected Output

The agent returns structured proxy analysis including:

Director Compensation:

• Stock awards valued at over $3 billion collectively
• Comparison to peer compensation levels

Governance Framework:

• Board standards for employees, officers, and directors
• Governance policies and oversight

Voting Matters:

• Non-binding votes on executive compensation frequency
• Director compensation disclosures

Data Sources: octagon-companies-agent, octagon-sec-agent, octagon-web-search-agent

4. Interpret Results

See references/interpreting-results.md for guidance on:

• Understanding compensation structures
• Evaluating governance practices
• Analyzing shareholder proposals
• Comparing to peer companies

Example Queries

Full Proxy Analysis:

Extract executive compensation details and governance information from TSLA's latest proxy statement.

CEO Compensation Focus:

What is the total compensation for AAPL's CEO in the latest proxy statement?

Board Composition:

Analyze the board of directors composition and independence from MSFT's latest DEF 14A.

Say-on-Pay Results:

What were the say-on-pay voting results for AMZN in their latest proxy?

Peer Comparison:

Compare executive compensation between GOOGL and META based on their latest proxy statements.

Shareholder Proposals:

What shareholder proposals were included in JPM's latest proxy statement and how did they fare?

Proxy Statement Components

Executive Compensation (Item 402)

Component	Description
Summary Compensation Table	Total pay for Named Executive Officers (NEOs)
Salary	Base salary amounts
Bonus	Cash bonus payments
Stock Awards	Equity grants at grant date fair value
Option Awards	Stock options at grant date fair value
Non-Equity Incentive	Performance-based cash compensation
Pension Value	Change in pension/deferred compensation
All Other Compensation	Perks, 401(k) match, insurance

CEO Pay Ratio

Element	Description
CEO Total Compensation	All-in CEO pay
Median Employee Pay	Median worker compensation
Pay Ratio	CEO pay / median employee pay

Compensation Discussion & Analysis (CD&A)

Section	Content
Philosophy	Compensation objectives and strategy
Pay Mix	Balance of fixed vs. variable pay
Performance Metrics	Goals used for incentive pay
Peer Group	Companies used for benchmarking
Decisions	Rationale for pay decisions

Corporate Governance

Area	Details
Board Composition	Directors, independence, diversity
Committees	Audit, Compensation, Nominating
Leadership Structure	Chair/CEO separation, lead director
Risk Oversight	Board role in risk management
Shareholder Rights	Voting standards, proxy access

Shareholder Proposals

Type	Common Topics
Governance	Board declassification, majority voting
Environmental	Climate disclosure, emissions targets
Social	Human rights, DEI reporting
Compensation	Pay for performance, clawbacks

Compensation Analysis

Pay Components Breakdown

Component	Typical Range	What to Look For
Base Salary	10-20%	Stability, changes
Cash Bonus	15-25%	Metrics, achievement
Stock Awards	40-60%	Vesting, performance
Options	5-15%	Strike price, term
Other	1-5%	Perks, benefits

Pay-for-Performance Alignment

Metric	Strong Alignment	Weak Alignment
TSR Correlation	Pay tracks returns	Pay disconnected
Metric Rigor	Challenging targets	Easy thresholds
Vesting	Performance-based	Time-based only
Peer Rank	Median position	Outlier high

Red Flags in Compensation

1. Excessive perks - Private jets, security, housing
2. Guaranteed bonuses - No performance link
3. Option repricing - Underwater options reset
4. Pension spiking - Inflated pension values
5. Golden parachutes - Excessive change-in-control pay
6. Tax gross-ups - Company pays executive taxes

Governance Assessment

Board Quality Indicators

Factor	Strong Governance	Weak Governance
Independence	>75% independent	<50% independent
Diversity	Diverse backgrounds	Homogeneous
Tenure	Balanced mix	All long-tenured
Overboarding	Limited seats	Directors overcommitted
Attendance	>90% average	Low attendance

Committee Structure

Committee	Key Oversight	Best Practices
Audit	Financials, controls	All independent, financial experts
Compensation	Executive pay	All independent, no interlocks
Nominating	Board composition	Independent, clear criteria
Risk	Enterprise risk	Defined charter, regular meetings

Shareholder Rights

Right	Shareholder-Friendly	Concern
Voting Standard	Majority voting	Plurality only
Proxy Access	Available	Not available
Special Meetings	Low threshold	High/no threshold
Written Consent	Allowed	Prohibited
Dual Class	Single class	Multi-class voting

Voting Analysis

Say-on-Pay Voting

Support Level	Interpretation
>90%	Strong approval
70-90%	Acceptable
50-70%	Concerns raised
<50%	Failed - action required

Director Elections

Support Level	Interpretation
>95%	Strong support
80-95%	Normal range
<80%	Significant opposition
<50%	Failed (if majority vote)

Shareholder Proposals

Support Level	Interpretation
>50%	Passed - expect action
30-50%	Significant support
20-30%	Moderate interest
<20%	Limited support

Analysis Tips

1. Track trends: Compare compensation over 3-5 years, not just one year.

2. Read the CD&A: Narrative explains rationale behind numbers.

3. Check peer group: Ensure peers are truly comparable.

4. Note changes: New compensation elements or governance provisions.

5. Follow the votes: Declining support signals concerns.

6. Review related transactions: Conflicts of interest disclosed.

Use Cases

• Investment analysis: Assess management alignment with shareholders
• Governance screening: Evaluate board quality and practices
• Activist research: Identify governance improvement opportunities
• Compensation benchmarking: Compare pay across companies
• ESG analysis: Evaluate social and governance factors