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The typical pay for CEOs at big U.S. companies now tops $10 million, or roughly 200 times the average American household's income. So you might think top executives could resist charging the company for treats like German cars, elite club memberships and the private use of jets.
Nope.
A review of contracts and severance agreements from the past few months shows companies continue to treat execs to a potpourri of goodies like these:
- A Mercedes-Benz given to the departing chief executive of a bank.
- Use of a jet for regular commutes to work.
- Exclusive club memberships.
- A discount card giving a departing Wal-Mart Stores (WMT, news, msgs) honcho -- a multimillionaire -- 10% off on toasters and other stuff.
"It's ridiculous what these people do," laments Don Hodges, who believes his Hodges Fund (HDPMX) outperforms partly because it avoids companies where there are signs of a weak board -- including excessive executive pay and perks. "You would think there would be a little shame to it. But there isn't."
All told, chief executives collected perks worth $438,342 on average in 2006, the most recent year for which comprehensive data are available, according to an Associated Press analysis of 386 Fortune 500 companies.
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Here's an early look at some of the juiciest perks of the past few months, uncovered by Michelle Leder of Footnoted.org. We'll find out more about the perks of 2007 as company filings trickle out in the coming months.
Retirement goodies
Though many Americans lose jobs with little more than two weeks' notice, departing executives often get special treats.Consider the golden goodbye Wal-Mart Vice Chairman and Chief Administrative Officer John Menzer will get as he leaves the world's biggest retailer this week.
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He signed a fresh deal five weeks ago that doubled his severance to $6.7 million in cash, paid out over the next 18 months. (His old deal gave him a mere $3 million in cash and stock.) Menzer also got immediate vesting of more than half of his 384,006 shares of restricted stock, worth more than $19 million at a recent share price of $50. This comes on top of fat paychecks, such as the $12.7 million he earned in 2006.
You'd think Menzer might be able to pay full price for stuff at Wal-Mart. But he and his wife will get a Wal-Mart discount card giving them 10% off regularly priced merchandise for three years. "I'm so glad," quips Wendy Fried, of Footnoted.org, "because I'd hate to see them chip away at that $6.7 million by paying the full retail price for socks."
Driving away in style
"Life gets better" is the motto of Korean-American bank Hanmi Financial (HAFC, news, msgs), based in Los Angeles. That seems to be true for departing President and CEO Sung Won Sohn.Sohn got a lump sum of $1.3 million when he left the bank recently. He also got the paid company memberships in exclusive Wilshire Country Club and a prestigious Los Angeles social club called the Jonathan Club, though he'll have to pay the monthly dues. He can drive to the clubs in style: The bank also gave him a 2005 Mercedes Benz 430S worth more than $36,000.
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You might guess Sohn could afford these extras on his own. He made $1.6 million at the bank in 2006. He'll earn $400 an hour as a consultant -- $6,000 a month for 15 hours of work. And he'll get early vesting of 40,000 shares of stock worth more than $300,000, according to an agreement reached in late December.
It's hard to attribute these gifts as rewards for performance. The bank's stock fell 50% in the three years Sohn was there.
We'll bring the office to you
Other execs negotiated sweet deals to take new jobs or renew their contracts.Many Americans face the painful task of relocating when they take a new job; incoming Advance Auto Parts (AAP, news, msgs) chief Darren Jackson didn't. Before starting his job in early January, he persuaded the company to open offices near his Minnesota home so he wouldn't have to commute to the company's Roanoke, Va., headquarters.
The Minnesota offices won't be finished until June. Until then, Jackson can use a corporate jet to commute -- when he isn't working from home.
Continued: Company even paid CEO's tax bill
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