One of the less-well-considered reactions to various corporate scandals of recent years has been "SarbOx," the Sarbanes Oxley bill that forced substantially more-detailed disclosures from public (securities-issuing) companies. The SEC, emboldened by both the statute itself and the prevailing mood (not to mention the continuing Enron issues1), proposed forcing companies to disclose pay of not just top-five executives, but of high-earning non executivesthe so-called "Katie Couric clause". Of course, one of the first (and loudest) objectors was Hollywood… but it shouldn't have been.
The "Katie Couric clause" actually applies to only a small portion of the entertainment industry. There's a very simple reason for this: It applies only to employees. Except for network television, it's actually quite rare for content providers (artists, musicians, actors, authors, etc.) to be employees any moreand especially highly paid employees. By the time most of these people who ever were employees work up to the point of being highly paid in comparison to executives, they've generally gotten agents and/or lawyers to restructure their arrangements into a partnership, independent contract, or the like.2 In fact, the vast majority of the highest-paid contracts outside of network TV go to great lengths to deny that the content provider is an employee.
So, if the SEC's purpose was to force greater disclosure in the entertainment industryan interesting, and perhaps appropriate, objectivewhat would it have had to do? In order to create a neutral rule, it would need to have required companies to disclose not just high-end employee salaries, but high-end personal services contracts (and so on). Leaving aside the legitimate competitive concerns this raises, it just moves the goalposts. Few high-end entertainers provide only personal services. Consider, for example, former President Clinton's book deal, which probably would have been subject to disclosure under this kind of rule. Oopsit wasn't all paid at once, was it? So do timing devices enable evasion? How about the fact that he provided not just services, but exploitable intellectual property, to his publisher? And so on.
Of course, none of this makes a damned bit of difference as long as Hollywood continues to dangle monkey points (percentages of "net profit") in front of big stars and gets away with continuing to claim that almost all movies lose money. If only I could apply that accounting to my taxes… In any event, it's sort of ironic that the only true "employees" are probably TV screenwriters and non-star actorswho have union representation. Thus, the only class of people who could truly be subject to this proposed rules are being paid based upon a collective bargaining agreement.
- Of course, this cuts both ways, as the Enron prosecutions are based on the theory that the conduct broke laws that were already in effect. That is, it's not the law (including regulations) that's the problem; it's enforcement. And that is a conclusion with which I heartily agree; let's take 15% of the money we're wasting on the so-called "war on drugs" and apply it against thieves carrying briefcases (or, more topically, thieves on the web).
- The obvious exception here is professional athletes. However, very, very few professional athletes are employed by companies otherwise subject to SEC reporting requirements. Sure, the Chicago Cubs, and a few other teams, are owned by conglomerates. However, I dare anyone to pry an SEC-compliant disclosure statement out of George Steinbrenner (Yankees) or Paul Allen (Sea