Why CEOs get perks: Jets for ef­fi­ciency, toys to en­tice top peo­ple

The Hamilton Spectator - - BUSINESS - AN­DERS MELIN AND JENN ZHAO,

Gone are the days when Tyco In­ter­na­tional ponied up mil­lions of dol­lars to in­dulge its ex­ec­u­tives’ lav­ish life­styles, in­clud­ing Den­nis Ko­zlowski’s $15,000 dog um­brella stand. But U.S. pub­lic com­pa­nies still give bosses some tasty tid­bits with their mul­timil­lion-dol­lar pay pack­ages.

Vail Re­sorts spent as much as $11,220 on ski lessons and lodg­ing at com­pany-owned fa­cil­i­ties for chief ex­ec­u­tive of­fi­cer Rob Katz, and fash­ion re­tailer Nord­strom con­trib­uted $33,246 in mer­chan­dise dis­counts for co-pres­i­dent Blake Nord­strom. Domino’s Pizza awarded CEO Pa­trick Doyle $11.1 mil­lion last year, top­ping it off with $224 for pizza, ac­cord­ing to a Bloomberg Pay In­dex anal­y­sis of proxy fil­ings.

“It begs the age-old ques­tion: You make X amount of money and you can’t af­ford this on your own?” said John Trenta­coste, a part­ner at Fari­ent Ad­vi­sors, a com­pen­sa­tion con­sult­ing firm. “But cer­tain perks can give the ex­ec­u­tive peace of mind and al­low him or her to fo­cus on the com­pany rather than other things that pop up in life. That’s the ra­tio­nale.”

Boards de­fend perks as a way to help bosses con­cen­trate on their jobs, and to en­cour­age them to stay in their jobs. Most large U.S. com­pa­nies, such as health in­surer Aetna Inc., re­quire that CEOs use cor­po­rate jets for per­sonal trips, ar­gu­ing that avoid­ing de­lays and en­sur­ing the per­son’s se­cu­rity out­weigh the costs. Some busi­nesses pro­vide CEOs with cars and driv­ers for sim­i­lar rea­sons.

Of the 200 high­est-paid ex­ec­u­tives at pub­licly traded U.S. com­pa­nies, Aetna’s Mark Ber­tolini in­curred the largest air-travel ex­pense last year with $602,781. Vor­nado Re­alty Trust spent the most on a car and driver — $272,290 for CEO Steven Roth.

Those costs are scru­ti­nized by share­hold­ers, who have be­come more at­ten­tive to ex­ces­sive spend­ing since in­vestor votes on com­pen­sa­tion for top man­agers, known as “say on pay,” were in­tro­duced in 2011. As a re­sult, many com­pa­nies have di­aled back on perks.

Coun­try-club mem­ber­ships, an oft-de­rided perk, are still com­mon in the oil-and-gas in­dus­try. Some com­pa­nies con­sider club mem­ber­ships es­sen­tial tools to keep clients and woo new ones.

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