When new compensation disclosure rules were first implemented last year, they shone a much brighter light on the perks bestowed upon chief executives, such as country club memberships, rides on the corporate jet, home security systems and rich pensions unavailable to the rank and file.
An outcry ensued. After all, some shareholders asked, why does a company need to pay country club dues for someone who already makes $10 million a year? Ditto for car allowances and healthcare deductibles. And if you make that much money, can't you manage to put aside something for retirement?
Facing such bad publicity, many companies have been cutting back on executive benefits grouped under the heading of "other" pay, experts say.
"This is one of the areas that shareholders get most upset about," said Derrick Neuhauser, an executive compensation consultant with BDO Seidman. "There is a definite reduction in perks."
But in some cases, the loss of perks is being offset by an increase in regular cash pay. Nonetheless, the change in perk practices is notable.
Many corporate directors view perks as a remnant of an earlier era and are happy when they have the opportunity to get rid of them, said Jack Marsteller, head of the compensation practice at Towers Perrin in Los Angeles.
"They simply don't believe in them in today's world," Marsteller said. "That's why you see many of these falling by the wayside."
But some boards apparently didn't get the memo. Consider Ryland Group Inc. The Calabasas home builder, hit hard by the housing downturn, had a miserable 2007, losing $334 million -- a far cry from the $360 million in profit it made in 2006. As a result, Chairman and Chief Executive R. Chad Dreier's cash and stock-based pay was slashed to $5.1 million last year from $20.9 million in 2006.
But Dreier didn't have to settle for a mere seven-figure package because his other pay, which increased last year, totaled $9.1 million. That included a $4.7-million boost to his retirement plans, an $80,000 allowance for "personal health and services," $47,000 in life insurance premiums paid, $15,600 in personal flights on the company plane and $9,136 in medical reimbursements.
His "other" pay also included more than $4 million in cash to offset income tax Dreier owed on his perks.
"Leave it to boards to make a liar out of Ben Franklin, who said that the only constants are death and taxes," said Patrick McGurn, executive vice president at Institutional Shareholder Services, which advises big shareholders on corporate governance issues. "Of the perquisites that are out there, this is arguably the most egregious of all."
In its regulatory filing on executive pay, Ryland said that if it didn't pay the tax on Dreier's benefits, it would have to give him more in cash. The company declined to elaborate.
Dreier wasn't the only executive enjoying a lot of "other" stuff in 2007. Here are more examples:
* McKesson Corp. gave John Hammergren $6.8 million in other pay, including $14,296 in financial planning services, $133,825 in private use of the company plane and $469 in "gifts." The company also reimbursed Hammergren $2,860 for legal fees he had incurred in renegotiating his employment agreement. (In other words, McKesson financed its CEO's efforts to extract a better pay package from the company.)
* Donald E. Felsinger's benefits from Sempra Energy were $4.9 million, including company contributions to his 401(k) plan, insurance premiums, tax reimbursements, charitable donations made on his behalf and his use of a company car.
* Ray R. Irani received a $2.5-million perk package from Occidental Petroleum Corp., including $774,756 for security services and $306,000 for tax preparation and financial planning services plus amounts for airplane use, administrative assistance, club dues and liability insurance.
* At Qualcomm Inc., Paul E. Jacobs got $2 million in other pay, including $122,000 of matching contributions to charity.
* Most of Larry Ellison's $1.7 million in other pay from Oracle Corp. was for security systems that the company says it requires him to have on his homes.