The Icing on the Cake Can Be Quite Rich for Some Executives
It’s not all about pay.
In addition to salary, bonus and grants of company stock, the rewards for top executives at big corporations often include country club memberships, free financial counseling, low-interest loans, supplemental retirement plans and investment options not available to the general public.
Once these perks exceed a certain threshold, they must be disclosed to shareholders. But the details often are buried in footnotes in company proxy statements that are easy to overlook.
Nonetheless, these benefits can be worth hundreds of thousands of dollars -- sometimes millions.
Consider the $6.6 million in “other” compensation given to R. Chad Dreier, chairman and chief executive of Calabasas homebuilder Ryland Group Inc. in 2002. Among other perks, the company paid $233,097 to Dreier’s retirement and deferred compensation plans and laid out $19,558 for his life insurance policy. The company also paid $4.5 million in Medicare and federal income taxes on Dreier’s restricted stock awards, a Ryland Group spokeswoman said.
Dreier’s pay package, which company officials say was justified by compensation studies of similar firms, isn’t typical. But it’s not unusual for companies to supplement top executives’ pay with tens of thousands of dollars’ worth of additional company-provided benefits.
The most common of these are supplemental retirement plans such as insurance payments and tax and financial planning services, experts say.
In the past, it also was common to give executives low-interest loans to buy houses or stock. These executive loans were outlawed by last year’s Sarbanes-Oxley Act, which was designed to curb certain corporate abuses. However, some of the loans remain outstanding.
For example, Ingram Micro Inc., a Santa Ana-based technology company disclosed loans to five executives in the company’s latest proxy statement. The loans, made to buy homes and pay taxes, bear interest rates of 2.84% to 6.4%.
However, the bulk of the loans are forgiven over three to five years if the executives continue to work for the company. In some cases, the company even pays the taxes triggered by what is known as “forgiveness of indebtedness” income.
The loans were made before the July 2002 passage of the Sarbanes-Oxley Act and are grandfathered under the law, a company spokeswoman said. Ingram Micro has made no new loans to executives since that law passed.
About $330,000 in “other” compensation made to Cypress-based PacifiCare Health Systems Inc. CEO Howard G. Phanstiel also related to a loan, made before the passage of the Sarbanes-Oxley legislation, that was forgiven in 2002, the company disclosed in public filings.
Here are some other perks gleaned from proxy statements filed by the largest Southland companies:
* Santa Monica-based Fremont General Corp.’s CEO, James A. McIntyre, received a $21,600 auto allowance; $93,303 in employee stock ownership plan contributions; and $7,017 from company-paid premiums for supplemental medical, dental and personal liability insurance.
* Irvine-based Allergan Inc. CEO David E. I. Pyott received a $9,000 car allowance and $1,500 for gas, $25,030 for financial planning, $1,672 in country club dues, $1,800 in insurance, $5,000 to his savings and investment plan, $4,746 to the employee stock ownership plan and $9,812 in above-market interest on Pyott’s deferred compensation. That’s in addition to his $2 million in salary and bonus.
* At Hilton Hotels Corp. in Beverly Hills, Chief Executive Stephen F. Bollenbach received $217,812 in “other” payments last year, including $102,011 in company contributions to Bollenbach’s retirement plans, $55,956 applied to the purchase of a company car and $42,491 attributable to Bollenbach’s personal use of the company’s plane.
Providing lavish perks to well-compensated CEOs galls some critics.
“They should pay for their own living expenses,” said Scott Klinger, co-director of the responsible wealth project at Citizens for a Sound Economy, “just like other employees do.”
