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After years of public outrage over gold-plated perks for top execs -- from $6,000 shower curtains to private jets and expensive race-car driving lessons for the kids -- you might think that companies have wised up and cut back on the giveaways.
You'd be wrong.
The perk-fest lives on. So far this year, execs have gotten a bevy of sweet deals that would make former Tyco International (TYC, news, msgs) CEO Dennis Kozlowski proud. Here are a few examples of some of the lavish goodies that companies have showered on execs:
- The new finance chief at eBay (EBAY, news, msgs) will get up to $700,000 if he can't get the price he wants for the Texas house he gave up to take his job with eBay in California.
- A new president at Starwood Hotels & Resorts Worldwide (HOT, news, msgs) will get $1.5 million for airfare during his first year on the job. The money is meant to help him commute to work in New York so he can keep his home in California while his son finishes high school there.
"After all we've been through, you would think boards would be extra diligent about awarding perks that basically waste money with little to show in return," says Daniel Pedrotty, an attorney at the AFL-CIO Office of Investment, which tries to pressure companies to be more responsible with money. "It strikes me as unusual that boards don't have more discipline with company money in light of all the attention this issue has gotten."
"What we have is a major crisis in America with ineffective directors," agrees Don Hodges, president of the Hodges Fund (HDPMX, news, msgs). "When they become directors, they join the country club, so to speak. They forget they are working for shareholders. Probably 85% of them feel like they work for the CEO, so they lay down on the job and give away large chunks of the company."
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The companies say that top talent is worth the price, and that competition for that talent creates and legitimizes the need for generous pay packages. But from a shareholder's point of view, it's hard to see how these kinds of sweet deals for execs help. Pay experts believe executive compensation works best when it's linked to performance -- and these execs get their perks no matter how good a job they do.
One solution, says Chuck Collins at United for a Fair Economy, would be to give shareholders greater say in pay packages. "Until compensation packages get approved by shareholders, and not boards that are hand-picked by management, we are going to keep seeing this kind of stuff."
Top prizes
Here's a closer look at some of the juicier perks executives have gotten so far this year, thanks to Michelle Leder at footnoted.org.- When former Nike Chief Executive William Perez resigned last January after a little over a year on the job, he got a very sweet golden parachute. Nike gave Perez a severance package worth $5.5 million, including $2.8 million that represents two years' base salary and a $1.75 million bonus for 2006 even though he didn't serve for most of the year. Nike accelerated the vesting of restricted stock -- allowing Perez to take another $11 million.
Nike also purchased his Portland, Ore., home for the price he paid, or $3.18 million. But here's the kicker: The company picked up the tab on $579,649 worth of renovations Perez made at the home. Nike also offered $56,500 to cover prepaid athletic club fees if he quits the gym.
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"If you are making that kind of money, do you really need to have someone pay your athletic club fees?" asks Leder.
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