The Executive Perk Is Still Thriving

[Quetzal]

The Executive Perk Is Still Thriving

NEW YORK (AP) - The executive perk, much criticized during the corporate scandals of the past few years, is still thriving at many big companies, where top managers take personal trips on company jets, have their taxes paid or get free home security systems.

The perquisites listed in the most recent proxy statements of Fortune 100 companies don't reach the excesses reported at Tyco International Ltd. or Adelphia Communications Corp., companies whose former CEOs have been tried for larceny or fraud. But the proxies show that the highest paid executives collectively enjoyed $30.9 million in additional compensation beyond salaries, bonuses and stock awards.

The most popular perks included free personal rides on corporate jets - companies spent a total of $6.4 million flying their CEOs. Companies also picked up $6.6 million of personal tax bills and paid $575,989 for executives' personal financial planning.

They also paid millions for temporary housing, forgiven loans, relocation expenses, personal cars and above-market interest on deferred compensation.

more...

http://news.findlaw.com/ap_stories/f/1310/4-23-2004/20040423111503_28.html

[jmowreader]

1. As long as it's reasonable...

I don't have a problem with this at all.

Yeah, they could live like monks--eschewing all except enough to buy food and a modest two-bedroom trailer--but they're not going to.

[aquart]

2. Define "reasonable."

It ain't reasonable and I DO have a problem with it.

Executives, thru sweetheart boards, are looting corporations of revenue meant, in a well-ordered society, for employees and investors.

The result is an extremely lop-sided society and a new form of royalty: THE CEO.

I would legally limit Executive salaries to 100 times the least paid contracted employee. That would include the little Thai girl busy making the sneakers and socks. No bonus would be paid in any year employees had to be fired.

[jmowreader]

3. Reasonable...

Paying to send the guy to France on vacation once a year would be reasonable.

Some companies buy their CEOs country club memberships. You're thinking "unreasonable." Actually it's not--it is not possible to calculate the billions of dollars in business transacted every year in golf carts. No CEO plays golf because it's fun.

You gotta look at how the CEO performs before you say something's reasonable or unreasonable. If your company's biggest asset is tax loss carryforward*, buying the CEO a Big Mac on Friday is unreasonable. If it shows 122 percent positive comp over last year (assuming last year was a good year too), opened 400 new stores in a shit economy and created 50,000 new jobs, free blowjobs and being paid in gold doubloons would be more than reasonable.

* You can only deduct so much loss from your taxes. The IRS allows you to "carry forward" excess loss to next year's return.

[Centre_Left]

4. The real cause of ridiculous perks, options etc..

Agency Problem

“An agency problem exists when an agent makes decisions that result in the pursuit of goals that conflict with the principal’s goals. Thus, when ownership and control are separated, a relationship is formed that potentially allows divergent interests (between principals and agents) to surface, which can lead to managerial opportunism.”

Hitt, Ireland & Hoskisson, Strategic Management, pp 314-5

State and federal laws are deliberately set up to protect managers at the expense of the stockholders, resulting in an agency problem. These laws need to be changed.

[unblock]

5. bingo, well, that and the tax dodge

plenty of perks avoid taxes. illegally, that is.

if my company lets my fly the company jet for pleasure, the cost of the trip is a taxable perk. but that often goes unreported.


but you are correct, the real problem is that execs make decisions that are no longer in the company's best interest when it's free to themselves personally.

corporations would realize better performance from their managers if they simply paid more salary and charged for the perks. but then managers would have to pay taxes....