Ski, eat pizza and dress on the cheap: Perks of CEOs
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 US public companies still give bosses some tasty tidbits with their multimillion-dollar pay packages.
Vail Resorts Inc spent as much as $11,220 on ski lessons and lodging at company-owned facilities for CEO Rob Katz, and fashion retailer Nordstrom Inc contributed $33,246 in merchandise discounts for co-President Blake Nordstrom. Domino’s Pizza Inc 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 ageold question: You make X amount of money and you can’t afford this on your own?” said John Trentacoste, a partner at Farient Advisors. “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 US 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 US 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 for corporate executives, a group that’s viewed favorably by just 31 percent of respondents in a recent Bloomberg National Poll.
Country-club memberships, an oft-derided perk, are still common in the oil-and-gas industry. They can help executives build ties in the community and, perhaps, encourage them to move to rural Texas or Oklahoma, far from urban centers. Some companies consider club memberships essential tools to help executives keep clients and woo new ones, yet still disclose them as perquisites. The perks come with a cost for executives. All benefits that don’t directly relate to the person’s job and aren’t offered broadly to employees are considered taxable income and must be disclosed in regulatory filings. Of course, some companies pay for the tax bill, too. Relocation expenses, which can include private-school tuition for children, also wind up in this category.
Defining what’s related to someone’s job can be tricky. The US Securities and Exchange Commission rebuked Facebook Inc in 2015 for not disclosing the cost of CEO Mark Zuckerberg’s personal-security program, which the company deemed to be directly related to his job. The firm spent $4.89 million last year on keeping Zuckerberg safe. — Bloomberg