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