'Superperks' sweeten executives' pay

By Michael Brush

Have the collapses of Enron and WorldCom, and high-profile takedowns of executives at companies like Tyco International, chastened Corporate America? Are vodka-spouting ice statues, $6,000 shower curtains and fine-art freebies a thing of the past?

Don't bet on it.

The corporate gravy train is still rolling, and its contents are as odd as ever. A sampling: $890,000 worth of race-car driving lessons for one president's sons, maid service, lawn sprinklers, Bermuda homes and in-home computer maintenance.

Companies confess to these superperks -- paid for by shareholders -- in proxy statements they have been filing in recent weeks with the Securities and Exchange Commission. By law, companies have to reveal many -- but not all -- of the extras they give top brass.

Here are a few of the generous perks that have surfaced so far this proxy season. These are just a few of the giveaways you can find at a Web site called footnoted.org, where I discovered these.

Life in the fast lane

An executive who serves 32 years at a company deserves some special commendation. But $890,000 worth of professional race-car driving instruction for his kids?

That's how much furniture-rental chain Aaron Rents (RNT, news, msgs) paid last year for driving instruction for two sons of William Butler Jr. He is a director and president of sales and lease ownership at Aaron Rents.

Based in Atlanta, Ga., the company sponsors professional race-car driver Michael Waltrip in the NASCAR Busch Series. As part of the deal, Waltrip runs a "driver development program." The program has just two students -- Butler sons William Kenneth Butler III and Brett Cameron Butler.

"This is pretty outrageous," says Michelle Leder, who operates footnoted.org. "I was in shock that they could call this a marketing expense."

The company gets excellent marketing mileage out of the deal, says Aaron Rents finance chief Gilbert Danielson. Local media outlets cover events at stores featuring the Butler brothers before they race in the United Speed Alliance Racing's Hooters Pro Cup Series. At races, the company has signage, an inflatable storefront and display tents. The driving lessons are part of an overall sports marketing program that will cost the company more than $7.5 million this year.

"Motor sports have been an integral part of our marketing program for a number of years," says Danielson. "The NASCAR fan is a perfect fit for the demographic of our customer base." Aaron Rents believes the marketing program has contributed to the company's undeniable success in recent years. The stock has risen to $27 from $7 over the past five years

But are the driving lessons paying off? Brett Butler places 28th in USAR's southern division of the Hooters Series, while Ken ranks 32nd in the northern division.

There's still hope for the Butler brothers though, as they will get close to $1 million worth of training this year, paid for by Aaron Rents.

Life in the fast lane, continued

When Varian Semiconductor (VSEA, news, msgs) Vice President of Sales and Service John Aldeborgh leaves the company this September, Varian Semiconductor will give him his company car -- a sporty Porsche Cayenne SUV. "A regular American-built SUV is not good enough? It has to be a Porsche?" asks Daniel Pedrotty of the AFL-CIO's Office of Investment.

Varian Semiconductor isn't shy about giving away cars to execs. The company also gave former chief executive Richard Aurelio his company car when he stepped down as chairman earlier this year. Though the company doesn't reveal the make of the car, it must be a nice ride. The company spent a whopping $72,400 on the leased car last year. Varian Semiconductor declined to comment.

It's not like Aurelio can't afford his own wheels. As non-executive chairman and consultant to the company, Aurelio still makes $200,000 a year, down from $300,000 last year. And as of last September, he had about 336,000 stock options, valued by the company at $4.43 million. When he stepped down as director in January, the company gave him 30,000 shares of restricted stock that vested immediately.

Auto parts maker Visteon (VC, news, msgs) is cutting U.S. jobs by moving plants to Mexico to reduce costs. But it hasn't trimmed a juicy car subsidy for one foreign exec. The company spent more than $52,000 last year on two leased cars for Heinz Pfannschmidt, an executive vice president in Germany. Pfannschmidt earned $1.6 million in salary, bonus, long-term incentive awards and other pay last year.

"Many leaders of European businesses have drivers, which can be a large expense. We do not take that approach," responds Visteon spokesman Jim Fisher. Pfannschmidt is leaving the company in May.

CEO: Come fly with me

Private aircraft travel (made possible by some CEO back-scratching) is the perk of choice for semiconductor equipment maker Semitool (SMTL, news, msgs). The company spent $3.24 million to lease three planes for top brass in the 12 months ending last September -- from a company owned by Chairman and Chief Executive Ray Thompson, no less.

"I don't understand why they need a fleet of planes. Isn't one plane enough?" asks Pedrotty. Thompson used company aircraft for $189,161 worth of personal trips in the same time frame. Semitool also spent $4,100 a month to lease hangar space from a company owned by Thompson.

Semitool declined comment, but says in its filings it believes "these lease agreements are on terms no less favorable to the company than could have been obtained from an unaffiliated party."

The Bermuda perk angle

Some executives don't need to leave home to get perked.

• Insurer Assured Guaranty (AGO, news, msgs) paid $240,000 for a home for its president and chief, Dominic Frederico, in Bermuda last year, even though he made $2.7 million in salary and bonus and received $2.1 million worth of restricted stock. He also got 166,667 options last year that the company estimates could be worth $1.9 million to $4.9 million if the stock goes up 5% to 10% a year during the term of the options. He gets the same number of options this year. "Almost every single Bermudan public company provides that benefit to the chief executive," responds Sabra Purtill, the manager of investor relations at Assured Guaranty. "In order to maintain the tax distinction between our U.S. operation and Bermudan operation, we are required to pass a whole series of tests." The CEO residence is part of that. His housing allowance looks high, but it is comparable to what other executives at Bermudan companies get, says Purtill, because housing is so expensive in Bermuda.

• Axis Capital Holdings (AXS, news, msgs), another insurer, spent $180,000 each for housing for Chief Executive and President John Charman and Chairman Michael Butt. William Fischer, chief and president of a division of the company called Axis Global Reinsurance, did even better. He got $204,000 for housing last year. Shareholders paid these housing costs even though it doesn't seem the execs would be hard up for cash. Charman got a salary, bonus and restricted stock worth more than $7.2 million last year. As of the end of last year he had 2.3 million exercisable options valued at $ 41 million. Butt got a pay package worth at least $3.8 million last year and he had options worth more than $2.1 million. Fischer took home pay worth $2.8 million and had options worth about the same amount.

Around the house

Several companies give execs freebies to help them out around the house.

• Shareholders at 1-800 Contacts (CTAC, news, msgs) paid $12,000 last year for "domestic services" for its chief executive, Jonathan Coon, plus taxes on the expense. The company wouldn't say what the "domestic services" were, but this typically means payments for maid service or a nanny, says Nell Minow of the Corporate Library, a corporate-governance watchdog. "In what way does his housekeeper benefit the shareholder?" she asks. Coon received salary of $209,000 in 2005 and sold 50,000 CTAC shares a year ago at $18, raising $900,000. He also owns 2.7 million shares, or 22% of the company, worth $35 million at recent stock price of around $13.

• As part of his retirement package, former Agilent Technologies (A, news, msgs) chief executive Edward Barnholt negotiated a $30,000-a-year payment for "administrative assistance" that includes home computer support. Barnholt, who is now chairman emeritus, earned at least $2.3 million a year in salary and bonus in 2005 and 2004, and he had 3.3 million options when he retired last October, estimated by the company to be worth $17 million. "I think he can afford to get his computer fixed at Best Buy (BBY, news, msgs) like the rest of us," quips Leder of footnoted.org. "That is something we wouldn't comment on; a lot of people work at home," says Agilent spokesperson Amy Flores.

• Board members at lawn-care equipment company Toro (TTC, news, msgs) get $30,000 a year and an annual stock grant worth $20,000. On top of that, Toro supplies directors with up to $6,000 worth of lawn-irrigation equipment, as well as any other Toro products for free. "We want our directors to be familiar with our products," says Toro general counsel Larry McIntyre. "It doesn't cost the company very much."

Does it matter?

Given that many of these expenses are just a drop in the bucket at big companies, is it even worth making an issue out of them? You bet, say corporate governance experts.

First, none of these perks are tied to performance, so they are a form of pay that doesn't spur execs to work harder -- a big no-no when designing pay packages. Next, excessive perks can be a sign that boards are too close to execs and neglecting shareholders. "I think investors need to pay attention to this stuff because it can be indicative of bigger problems," says Leder.

Besides, there's another basic flaw in the "too small to matter" rebuttal. "If these things are so trivial, then the CEO should be able to pay for them himself," says Minow.

At the time of publication, Michael Brush did not own or control shares of companies mentioned in this column.