Free beer! Free boat outings! Free taxes!
Even as CEO pay has increased, their perquisites, from personal flights on the corporate jet or yacht, to cars and drivers, to country-club fees and home alarm systems, have persisted.
The perks mean free stuff for a crowd that could afford to pay its own way. After all, the median 2006 total pay for the CEOs at 386 Standard & Poor’s 500 companies analyzed by The Associated Press was $8.3 million.
In 2006, the group’s total amount of “other compensation” was $169.2 million. Besides all the cushy perks — which are considered taxable income by the government — many companies picked up the tab for those costs, too.
For the first time this year, investors got a better look at all this extra stuff. New proxy rules required companies to disclose perks that cost more than $10,000, a much lower threshold than the previous requirement of $50,000, or 10 percent of total annual compensation.
Some of the year’s biggest perks came in the way of payments for executives’ taxes. Public Storage Inc. covered CEO Ronald Havner Jr.’s $2.6 million in taxes on his bonus payments, which included $3 million in cash and $786,500 for performance-based compensation.
Alcoa Inc. disclosed for the first time that it paid hundred of thousands of dollars to its top executives to cover the taxes on company-paid relocation expenses, country club dues, spousal travel and life insurance.
Johnson & Johnson’s William Weldon received $2.3 million on dividend equivalents on Certificates of Extra Compensation that the company awards executives. The certificates “provide deferred compensation paid at the end of an employee’s career,” the company said in its proxy filing.
Weldon choose to defer payment on all but $900,000 of the money.
Showing up in the most proxies were CEOs’ personal use of company jets. The year’s top frequent fliers include Michael Jeffries, chairman and CEO of retailer Abercrombie & Fitch Co., who took $776,723 worth of flights on the corporate jet.
But Starwood Hotels & Resorts Inc. former CEO Steven Heyer may have lapped him. Starwood paid $866,178 for Heyer’s travel between his home in Atlanta and the company’s offices in New York. The company said it does not consider the air travel, car and driver in New York and stays in New York hotels a personal benefit or a perk.
Other notable goodies were company products. Goodyear Tire & Rubber Co. executives can get up to two sets of tires a year. Reynolds American Inc. executives get free cigarettes and chewing tobacco. Anheuser-Busch Cos.’ CEO gets free beer.
Executives at Brunswick Corp. can use the company-manufactured boats for marketing, hosting civic events, personal use and “to enhance product knowledge.” That’s part of a program that “encourages active participation in boating on the part of company officers,” according to Brunswick’s proxy.
The company valued Chairman and CEO Dustan McCoy’s boat use at $222,678 in 2006, including coverage for his related taxes. Executives also can get company products worth $15,000 a year.
Executives at some companies can also get cash for their unused vacation time. Among them is Ronald Sugar, chairman and CEO of Northrop Grumman Corp., who got an extra $49,347 for that. Sugar’s total pay, including that payout, was $18.64 million.
While few companies are moving away from perks, there are a few scaling back — a bit. Ford Motor Co. executive vice president of the Americas Mark Fields will no longer use company aircraft for his personal trips home on weekends. In its proxy, Ford said that compensation for such trips totaled $517,560 in 2006.
He won’t be slouching, however, since the company will pick up the tab for him to fly commercial — including in first class.