Proxy season each year is when public companies are forced to disclose just how much they pay their top executives. But the really fun reading is in the column titled "other compensation." That's where companies must explain, in sometimes embarrassing detail, how much other stuff they showered on their executives, from jaunts on the corporate jet to company-paid housing in Bermuda to charitable contributions that just might smooth somebody's way into high society.
And then there's the Executive Dude Ranch. Fidelity National Financial is in one of the world's most boring businesses — title insurance — but its executives found time to kick up their heels to the tune of $453,382 last year at the Rock Creek Cattle Co., a 28,000-acre "working Montana ranch" that just happens to be owned by Fidelity's chairman, William P. Foley II.
The choice was natural: Foley grew up in the Texas Panhandle and probably draws comfort from the aw-shucks environment of his cattle ranch, where the website says "most introductions still start with a slight tip of the hat and a firm handshake." Fidelity also spent $55,000 at wineries and restaurants and a hotel owned by Foley, who earned $12.5 million last year.
Most of the following outrageous perks were ferreted out by Michelle Leder and the team at Footnoted.com, a Morningstar unit that scans Securities and Exchange Commission filings for the details investors might otherwise miss.
Footnoted anointed billionaire Barry Diller the King of the Corporate Jet after the chairman of Expedia and IAC/InterActiveCorp racked up $1.28 million worth of personal use of the jet jointly owned by the two companies — on top of $243,000 worth of travel for which he reimbursed the company. Blame company policy, IAC explains: Diller is required to use the jet for security reasons. It also "permits him to travel non-stop and without delay," and "change his plans quickly in the event Company business requires."
The runners-up have to be Melvin and Ellen Gordon, the husband-and-wife team who run Tootsie-Roll Industries. Tootsie-Roll spent $1.2 million last year flying Melvin, 92, and Ellen, 80, from their home in an unspecified location to headquarters in Chicago, where the company also leases them an apartment for $120,000 a year. Embattled Chesapeake Energy Chief Aubrey McClendon would have been a contender, but he reimbursed the company $650,000 of his $1.1 million airfare bill "after consultation between Mr. McClendon and the Compensation Committee."
The company car is a perk that extends well down into the organization chart, but some top executives have apparently turned it into an art form. S.L. Green Realty in New York spent $51,882 on a personal car for Chairman Stephen Green — plus another $119,050 for a chauffeur. Footnoted figures that works out to $468 a day, or enough to drive 233 miles a day, 365 days a year in a New York City cab. Runner-up was CA Inc., which disclosed spending $113,057 on "personal automobile use" for CEO William McCracken.
Expensive security services are a necessary evil for high-profile CEOs, but the disparity between companies in this area is startling. Las Vegas Sands spent $2.6 million on security for Chairman Sheldon Adelson and his family, while Amazon spent $1.6 million protecting Jeff Bezos. Goldman Sachs, in contrast, spent $258,701 on security for Chief Executive Lloyd Blankfein.
Goldman also prohibits personal use of company aircraft unless the travel involves company business. But when it comes to charity distributed in the name of its executives, the investment bank has an open wallet. Goldman says it funds GS Gives, a donor-advised fund, with reductions in executive pay below what they'd otherwise make. GS Gives gave away $220 million last year, including $5 million to charities selected by Blankfein.
Liberty Global, an international cable-TV operator, gave away $223,736 to groups selected by Chairman Michael Fries, including ten grand to an organization that "gave an award to Mr. Fries." WebMD gave $1.6 million to the Rose Foundation, where Chairman Martin Wygod is a trustee, and Wyndham Worldwide offers the somewhat ghoulish perk of buying each director a $1.1 million life insurance policy with $1 million of that directed toward the charity of their choice when they shuffle off these mortal coils.
Finally, the Bermuda insurers seem to have a lock on outrageous housing allowances, perhaps because the island tightly restricts property sales to non-residents, driving the price immigrants pay for a single-family home to an average of $2.8 million. Platinum Underwriters Holdings spent $432,000 on housing for Robert S. Porter, chief of its Bermuda unit, while Axis Capital Holdings promised its chief executive $25,000 a month for a place to live. Honorable mention goes to the head of Dell's services division, Stephen F. Schuckenbrock, who cost the company $1.9 million in expenses for the 200-mile move from Austin to Plano, Texas.
These perks may annoy investors and envious employees who don't share in them, but they serve a useful purpose, says M. Todd Henderson, a professor at the University of Chicago Law School. Henderson penned an article that compared perks to "corporate heroin," meaning they leave executives tied to the company and less likely to steal or slack off. Henderson's theory is that executives who amass enough savings to be independently wealthy are more likely to be disloyal to their employer. So perks like forgivable loans or free housing are better than cash since the company can take them away with little risk of being forced to give them back.
"If you pay him the cash, that cash is gone," Henderson says. "If you get him used to a lifestyle of largesse, he's addicted and will have to continue to perform to get it."