Golden Coffins, Golden Offices, Golden Retirement
by Alistair Barr
May 13, 2009
provided byMarketWatch

Ten of the most egregious executive perks

Running big public companies is hard work, so many executives get a little help
to keep their noses to the grindstone.

Use of company jets, cars and drivers, free home security, free financial
planning advice and country club memberships. Some of these perquisites, or
perks, keep coming after retirement. Even in death, the money keeps flowing in
the form of so-called golden coffins.

In the midst of the worst global financial crisis since the Great Depression,
public anger against executive compensation and benefits has reached fever
pitch, so some perks may be on the way out.

Here are some of the most egregious perks from the golden era of executive
compensation, according to corporate governance experts.

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1. The Parting Perk

Jack Welch ran General Electric (GE) for two decades, turning the industrial
conglomerate into one of the most successful companies in the world and
cementing a legacy as one of the best chief executives ever.

He also negotiated an employment and retirement agreement in 1996 that
included all the perks a hard-working executive could ever need, making Welch
a noted leader in this area too.

The year after he retired on Sept. 30, 2001, Welch got roughly $2.5 million in
perks under the agreement, according to the Securities and Exchange
Commission, which charged GE in 2004 with failing to tell shareholders enough
about the package.

The perks included access to GE aircraft for unlimited personal use and for
business travel; exclusive use of a furnished New York City apartment that,
according to GE, in 2003, had a rental value of roughly $50,000 a month and a
resale value of more than $11 million; unrestricted access to a chauffeured
limousine driven by security professionals; a leased Mercedes Benz; office
space in New York City and Connecticut; professional estate and tax advice; a
personal assistant; communications systems and networks at Welch's homes,
including television, fax, phone and computer systems, with technical support;
bodyguard security for speaking engagements; installation of a security system
in one of Welch's homes and continued maintenance of security systems GE
previously installed in three of Welch's other homes.

More perks were alleged in 2002 during Welch's divorce from his wife at the
time, Jane Beasley Welch. Papers filed in the case disclosed floor-level seats at
New York Knicks games, courtside seats at the U.S. Open and some dining bills
at Jean Georges, a three-star Michelin restaurant where the tasting menu
currently costs almost $150 per person.

All costs associated with the New York apartment were allegedly covered in the
package too, including wine, food, laundry, toiletries and newspapers.

Realizing he faced "a huge perception problem," Welch quickly gave up most of
the perks, according to a 2005 interview in the Boston Globe. However, he
didn't apologize, telling the newspaper the benefits were part of a contract that
helped GE keep him at the company longer.

2. Office Renovations

Fast-forward to early this year and another well respected CEO faced a similar
dilemma.

John Thain, the former head of NYSE Euronext (NYX) , was hired by Merrill
Lynch in late 2007 to steer the struggling brokerage firm through the financial
crisis.

Soon after his appointment, Thain spent $1.2 million to renovate his new office,
two conference rooms and a reception area. Furniture included a $35,113.50
"commode on legs," a $68,178 19th century credenza and a pair of guest
chairs costing $87,783.

The decorating spree emerged in January, a few months after government
bailouts of the largest U.S. banks and Wall Street firms, including Merrill.

Thain quickly said he would reimburse the firm for all the expenses, calling them
"a mistake in the light of the world we live in today."

3. 'Stay Bonus,' Even If You're Dead

Some companies are so keen to hold on to executives that they promise big
pay and benefits even if the talent dies -- in contracts known as golden coffins.

Life insurance policies worth millions of dollars are the least controversial part
of these packages -- even though buying such coverage without company help
shouldn't be too difficult for executives pulling in six or seven figures a year.

A peek under the lid of several golden coffins also reveals big severance
payments, pensions and continued salaries if executives pass away.

Abercrombie & Fitch (ANF) agreed to pay Chief Executive Michael Jefferies a
$6 million "stay bonus" to keep him running the successful fashion clothing
retailer, according to its 2007 proxy statement.

If Jefferies dies, the bonus stays and is paid out, along with $10 million from a
company-purchased life insurance policy, to his estate. The retailer would also
pay some of his incentive compensation, bringing the golden coffin's value to
more than $17 million, assuming he died on Feb. 2, 2008, according to the
proxy.

4. Gross-Ups

If General Dynamics (GD) Chief Executive Nicholas Chabraja died at the end of
2008, his estate would have received almost $30 million, according to the ship
and airplane builder's latest proxy statement.

That includes a lump-sum cash payment of $8.56 million in lieu of his use of
corporate aircraft and reimbursement for office space, administrative support
and moving expenses. It also includes the cost of paying taxes on those
benefits -- known as gross ups.

Many companies are eliminating gross-ups, but there were still some
spectacular examples in recent years.

If Nabors Industries Chief Executive Eugene Isenberg died, became disabled or
was terminated without cause at the end of 2007, the oil-services company
would have paid more than $260 million in cash severance, according to its
proxy filed in April 2008.

If Isenberg was let go because there was a change in control of the company,
Nabors (NBR) would have covered the tax on the severance and other
payments for total gross-ups of more than $114 million, the proxy explained.

5. Tax Preparation

Unfortunately for CEOs, they don't have all their taxes paid by the companies
they run. This can lead to a time-consuming process known as filing a personal
tax return.

Big salaries, stock options, restricted stock awards and other forms of
compensation can make tax returns tricky. So companies sometimes cover the
cost of professional tax preparation and financial advice for their CEOs.

Occidental Petroleum (OXY) provided Chief Executive Ray Irani with $403,285
in tax preparation and financial planning services in 2008. That's nearly eight
times the median U.S. household income and more than the $400,000 salary of
the President of the United States, according to the AFL-CIO, a union group.

Irani received $49.9 million in direct compensation last year, making him one of
the highest paid executives in the U.S., according to the Wall Street Journal.

6. Keeping the CEO Safe

If companies are paying top dollar to attract and retain the best executives,
some figure it's only right to protect the investment as much as possible.

Affiliated Computer Services (ACS) spent more than $1.7 million from 2004
through 2007 for security systems, advice and equipment along with "personal
protection services" for Chairman and founder Darwin Deason, according to the
company's 2007 proxy statement.

7. Country Club Memberships

On the rare occasion it's safe to leave home, some CEOs like to unwind at
country clubs. Companies say there's a business purpose for this perk:
hobnobbing with other executives can lead to new deals and ideas.

Countrywide Financial, now owned by Bank of America (BAC), paid more than
$940,000 in country club memberships for CEO Angelo Mozilo and other
executives including Stanford Kurland, David Sambol and Eric Sieracki from
2003 through 2006, according to proxy statements filed by the mortgage giant.

The money covered monthly dues, assessments, fees and business-related
meals, Countrywide said, adding that "a significant portion" of the memberships
were for "business purposes."

Mattel (MAT) paid $150,000 last year to cover a country club initiation fee for
CEO Robert Eckert. The toymaker spent another $233,620 on country club
memberships for other executives and on additional perks including company
cars, financial advice and tax preparation, physicals (for spouses, too) and
home-security systems, according to its latest proxy.

8. Cars and Gas

Mattel CEO also gets a company-issued credit card that he can use to gas up
his car.

Ford Motor Co. (F) and General Motors (GM) provide executives with two free
cars a year and free gas as part of broader "vehicle evaluation" programs that
require managers to give the companies feedback on how their vehicles are
performing.

9. Execs, Families Fly in Style

But why drive when you can fly?

In 2006, Ford paid $517,560 so executive Mark Fields could fly to work in
Michigan from his Florida home and back on weekends on the company's
aircraft. The automaker and Fields agreed to change the perk and now he
commutes first class, at a cost of roughly $29,000 a year, according to the
company's latest proxy. Ford still covers the tax on this perk.

Ford also paid for the family of CEO Alan Mulally to fly between Michigan and
Seattle, Wash. They used to fly on company aircraft, but the automaker is
selling its planes. Ford will now charter private aircraft for the CEO, and his
family will be allowed to travel with him on trips. Ford will also pay for coach-
class flights for Mulally's family when they travel at his request.

Qwest Communications (Q) paid for the wife and minor child of CEO Edward
Mueller to fly on the telecom company's aircraft between California and
Colorado during the first half of 2008, as part of a package of relocation
benefits. Qwest also paid the tax on these perks, according to its latest proxy.

In 2007, Mattel paid $18,833 to cover the cost of house-hunting trips by the
spouse of Neil Friedman, president of Mattel Brands, ahead of his planned
relocation from New York to Los Angeles, according to the toymaker's proxy
covering that year.

10. Plum Pensions

After decades of tireless service, CEOs deserve a comfortable retirement. If
they haven't managed to save some of their prodigious earnings, some
companies make sure the money keeps flowing.

By the end of 2005, Pfizer CEO Hank McKinnell had accrued a pension that the
drugmaker estimated was worth more than $83 million, or more than $6.5
million a year, according to its proxy statement filed in 2006.

Alistair Barr is a reporter for MarketWatch in San Francisco.
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