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 Posted: Fri Oct 30, 2009 5:23 pm |
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i am dealing with a well known stalker right now, that thinks
executive perks are only worth peanuts:Golden coffins, golden offices,
golden retirement Ten of the most egregious executive perks, public
anger against executive compensation and benefits has reached fever
pitch
http://www.marketwatch.com/story/golden-coffins-10-of-the-most-egregious-ceo-perks
Golden coffins, golden offices, golden retirement
Ten of the most egregious executive perks
SAN FRANCISCO (MarketWatch) -- Running big public companies is hard
work, so many executives get a little help to keep their noses to the
grindstone.
Use of company jets, cars and drivers, free home security, free
financial planning advice and country club memberships. Some of these
perquisites, or perks, keep coming after retirement. Even in death,
the money keeps flowing in the form of so-called golden coffins.
In the midst of the worst global financial crisis since the Great
Depression, public anger against executive compensation and benefits
has reached fever pitch, so some perks may be on the way out.
SAY ON PAY
Tech's unlikely leadership
The tech industry is taking the lead in giving shareholders more
influence over top salaries, thereby preempting impending legislation,
shielding compensation-committee members and sharpening technology's
appeal to institutional investors.
• New rules mean new weapons for activists?
COMPENSATION REGULATION
Serving two masters
Are CEO pay packages compromised when the same consulting firm hired
by the board also provides other services to the company? The SEC
wants investors to decide.
• New rules mean new weapons for activists?
Here are some of the most egregious perks from the golden era of
executive compensation, according to corporate governance experts.
1. The parting perk
Jack Welch ran General Electric (GE 14.24, -0.02, -0.14%) for two
decades, turning the industrial conglomerate into one of the most
successful companies in the world and cementing a legacy as one of the
best chief executives ever.
He also negotiated an employment and retirement agreement in 1996 that
included all the perks a hard-working executive could ever need,
making Welch a noted leader in this area too.
The year after he retired on Sept. 30, 2001, Welch got roughly $2.5
million in perks under the agreement, according to the Securities and
Exchange Commission, which charged GE in 2004 with failing to tell
shareholders enough about the package.
The perks included access to GE aircraft for unlimited personal use
and for business travel; exclusive use of a furnished New York City
apartment that, according to GE, in 2003, had a rental value of
roughly $50,000 a month and a resale value of more than $11 million;
unrestricted access to a chauffeured limousine driven by security
professionals; a leased Mercedes Benz; office space in New York City
and Connecticut; professional estate and tax advice; a personal
assistant; communications systems and networks at Welch's homes,
including television, fax, phone and computer systems, with technical
support; bodyguard security for speaking engagements; installation of
a security system in one of Welch's homes and continued maintenance of
security systems GE previously installed in three of Welch's other
homes.
Reuters
Retired CEO and Chairman of General Electric Jack Welch.
More perks were alleged in 2002 during Welch's divorce from his wife
at the time, Jane Beasley Welch. Papers filed in the case disclosed
floor-level seats at New York Knicks games, courtside seats at the
U.S. Open and some dining bills at Jean Georges, a three-star Michelin
restaurant where the tasting menu currently costs almost $150 per
person.
All costs associated with the New York apartment were allegedly
covered in the package too, including wine, food, laundry, toiletries
and newspapers.
Realizing he faced "a huge perception problem," Welch quickly gave up
most of the perks, according to a 2005 interview in the Boston Globe.
However, he didn't apologize, telling the newspaper the benefits were
part of a contract that helped GE keep him at the company longer.
2. Office renovations
Fast-forward to early this year and another well respected CEO faced a
similar dilemma.
John Thain, the former head of NYSE Euronext (NYX 26.10, +0.25,
+0.97%) , was hired by Merrill Lynch in late 2007 to steer the
struggling brokerage firm through the financial crisis.
Soon after his appointment, Thain spent $1.2 million to renovate his
new office, two conference rooms and a reception area. Furniture
included a $35,113.50 "commode on legs," a $68,178 19th century
credenza and a pair of guest chairs costing $87,783.
The decorating spree emerged in January, a few months after government
bailouts of the largest U.S. banks and Wall Street firms, including
Merrill.
Thain quickly said he would reimburse the firm for all the expenses,
calling them "a mistake in the light of the world we live in today."
3. 'Stay bonus,' even if you're dead
Some companies are so keen to hold on to executives that they promise
big pay and benefits even if the talent dies -- in contracts known as
golden coffins.
Life insurance policies worth millions of dollars are the least
controversial part of these packages -- even though buying such
coverage without company help shouldn't be too difficult for
executives pulling in six or seven figures a year.
A peek under the lid of several golden coffins also reveals big
severance payments, pensions and continued salaries if executives pass
away.
Abercrombie & Fitch (ANF 32.82, +0.04, +0.12%) agreed to pay Chief
Executive Michael Jefferies a $6 million "stay bonus" to keep him
running the successful fashion clothing retailer, according to its
2007 proxy statement.
If Jefferies dies, the bonus stays and is paid out, along with $10
million from a company-purchased life insurance policy, to his estate.
The retailer would also pay some of his incentive compensation,
bringing the golden coffin's value to more than $17 million, assuming
he died on Feb. 2, 2008, according to the proxy.
4. Gross-ups
If General Dynamics (GD 63.27, +0.57, +0.90%) Chief Executive
Nicholas Chabraja died at the end of 2008, his estate would have
received almost $30 million, according to the ship and airplane
builder's latest proxy statement.
That includes a lump-sum cash payment of $8.56 million in lieu of his
use of corporate aircraft and reimbursement for office space,
administrative support and moving expenses. It also includes the cost
of paying taxes on those benefits -- known as gross ups.
Many companies are eliminating gross-ups, but there were still some
spectacular examples in recent years.
If Nabors Industries Chief Executive Eugene Isenberg died, became
disabled or was terminated without cause at the end of 2007, the oil-
services company would have paid more than $260 million in cash
severance, according to its proxy filed in April 2008.
If Isenberg was let go because there was a change in control of the
company, Nabors (NBR 20.83, -1.50, -6.72%) would have covered the tax
on the severance and other payments for total gross-ups of more than
$114 million, the proxy explained.
5. Tax preparation
Unfortunately for CEOs, they don't have all their taxes paid by the
companies they run. This can lead to a time-consuming process known as
filing a personal tax return.
Big salaries, stock options, restricted stock awards and other forms
of compensation can make tax returns tricky. So companies sometimes
cover the cost of professional tax preparation and financial advice
for their CEOs.
Occidental Petroleum (OXY 76.02, +0.14, +0.19%) provided Chief
Executive Ray Irani with $403,285 in tax preparation and financial
planning services in 2008. That's nearly eight times the median U.S.
household income and more than the $400,000 salary of the President of
the United States, according to the AFL-CIO, a union group.
Irani received $49.9 million in direct compensation last year, making
him one of the highest paid executives in the U.S., according to the
Wall Street Journal. See CEO pay survey at WSJ.com.
6. Keeping the CEO safe
If companies are paying top dollar to attract and retain the best
executives, some figure it's only right to protect the investment as
much as possible.
Affiliated Computer Services (ACS 52.09, -0.92, -1.74%) spent more
than $1.7 million from 2004 through 2007 for security systems, advice
and equipment along with "personal protection services" for Chairman
and founder Darwin Deason, according to the company's 2007 proxy
statement.
7. Country club memberships
On the rare occasion it's safe to leave home, some CEOs like to unwind
at country clubs. Companies say there's a business purpose for this
perk: hobnobbing with other executives can lead to new deals and
ideas.
Countrywide Financial, now owned by Bank of America (BAC 14.56, -0.02,
-0.14%) , paid more than $940,000 in country club memberships for CEO
Angelo Mozilo and other executives including Stanford Kurland, David
Sambol and Eric Sieracki from 2003 through 2006, according to proxy
statements filed by the mortgage giant.
The money covered monthly dues, assessments, fees and business-related
meals, Countrywide said, adding that "a significant portion" of the
memberships were for "business purposes."
Mattel (MAT 18.93, -0.20, -1.05%) paid $150,000 last year to cover a
country club initiation fee for CEO Robert Eckert. The toymaker spent
another $233,620 on country club memberships for other executives and
on additional perks including company cars, financial advice and tax
preparation, physicals (for spouses, too) and home-security systems,
according to its latest proxy.
8. Cars and gas
Mattel CEO also gets a company-issued credit card that he can use to
gas up his car.
Ford Motor Co. (F 7.05, +0.05, +0.71%) and General Motors (MTLQQ
0.59, -0.02, -3.28%) provide executives with two free cars a year and
free gas as part of broader "vehicle evaluation" programs that require
managers to give the companies feedback on how their vehicles are
performing.
9. Execs, families fly in style
But why drive when you can fly?
In 2006, Ford paid $517,560 so executive Mark Fields could fly to work
in Michigan from his Florida home and back on weekends on the
company's aircraft. The automaker and Fields agreed to change the perk
and now he commutes first class, at a cost of roughly $29,000 a year,
according to the company's latest proxy. Ford still covers the tax on
this perk.
Reuters
Ford Motor Co. President and CEO Alan Mulally speaks at a new
conference in Michigan May 6, 2009.
Ford also paid for the family of CEO Alan Mulally to fly between
Michigan and Seattle, Wash. They used to fly on company aircraft, but
the automaker is selling its planes. Ford will now charter private
aircraft for the CEO, and his family will be allowed to travel with
him on trips. Ford will also pay for coach-class flights for Mulally's
family when they travel at his request.
Qwest Communications (Q 3.59, -0.05, -1.37%) paid for the wife and
minor child of CEO Edward Mueller to fly on the telecom company's
aircraft between California and Colorado during the first half of
2008, as part of a package of relocation benefits. Qwest also paid the
tax on these perks, according to its latest proxy.
In 2007, Mattel paid $18,833 to cover the cost of house-hunting trips
by the spouse of Neil Friedman, president of Mattel Brands, ahead of
his planned relocation from New York to Los Angeles, according to the
toymaker's proxy covering that year.
10. Plum pensions
After decades of tireless service, CEOs deserve a comfortable
retirement. If they haven't managed to save some of their prodigious
earnings, some companies make sure the money keeps flowing.
By the end of 2005, Pfizer CEO Hank McKinnell had accrued a pension
that the drugmaker estimated was worth more than $83 million, or more
than $6.5 million a year, according to its proxy statement filed in
2006.
Alistair Barr is a reporter for MarketWatch in San Francisco. |
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