Perking up

The wave of anger over executive pay has yet to crest, thanks in part to the continuing recession. Companies have begun to reel in compensation levels, as overall CEO pay fell 7% in 2008, to about $7.6 million. It appears the public outcry has been heard. The U.S. government has put restrictions on executive pay for companies receiving federal aid and, in the name of good public relations, a CEO would be crazy to receive any outlandish perks as part of his or her pay package … right? Wrong.

As overall pay fell 7%, the median value of CEO perks rose 7%, to hit $170,501. What kind of perks are we talking about? According to a May AP story, CEOs are still getting things like plane travel, car allowances, security and financial planning services. And while financial planning seems reasonable – I mean, these are busy people with lots of money – Ray Irani, CEO for Occidental Petroleum, received $400,000 worth of financial planning in 2008. Personally, I would need financial planning advice just to handle the $400,000.

How about this for a perk? If you’re a wealthy executive, it seems only right to make charitable donations. Well, if you work for Haliburton, they will match your donations, so you need to give only half of what you might have given. XTO Energy, out of Fort Worth, Texas, supplemented donations to CEO Bob Simpson’s alma mater, Baylor University, as well as to the school his children attend.

Other companies have tried to get away from high-profile perks that can draw public scorn. The solution: a perk fund that CEOs can use to pay for the perks they choose. That way, CEOs get what they want, and no one can say that the company is directly paying for a country club membership or the like. In 2008, Edward Breen, CEO of Tyco, had $70,000 he could dip into, and Reynolds American Inc. CEO Susan Ivey had access to $29,000.

We have yet to see if this is the first move by compensation consultants and CEOs to outmaneuver the government when it comes to restricting pay packages. But many compensation experts have warned that any attempt to rein in executive pay usually results in loopholes that allow the pay packages to keep getting bigger. In the current climate, it’s more important than ever to make sure your company is comfortable with public opinion about the perks it provides.
David Wentworth
David Wentworth, Senior Research Analyst
David Wentworth has been a research analyst for the Institute for Corporate Productivity since 2005. David has previously worked with digital media development and delivery, and currently researches several topics for i4cp, including workforce technology and the outsourcing of human resources. David has a bachelor’s degree from the University of Massachusetts.