Executive Loan Ban Could Hamper Firms

Efforts by Congress and the Bush administration to ban corporate loans could take away a tool frequently used by Silicon Valley companies to attract top talent to one of the nation’s most expensive places to live.

Half of the region’s 150 largest companies have lent tens of millions of dollars to top bosses to help them buy homes and stock, according to the San Jose Mercury News’ examination of compensation packages disclosed in the latest proxy statements filed with the Securities and Exchange Commission.

Corporate loans often are tailored at favorable terms unavailable at banks or brokerages. Companies commonly charge no interest, ease terms of the loans or simply forgive them; 40% of valley companies that made loans later forgave them at least in part.

The report indicates that Silicon Valley companies made most loans for three reasons: for home buying (40% of the lending companies), for the purchase of company stock (17%) and for tax bills (10%).