Debt ceilings, bailouts, economic downturns, stocks plummeting and cost-cutting layoffs have become daily realities in today's economy. Faced with rising unemployment, pay cuts and the very real probability of losing their jobs, workers have tightened belts, cut all unnecessary spending and have pinched pennies until Lincoln is pleading for help.
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Yet, the CEOs at some of the America's top corporations are rolling in the money and swimming in the perks. While top performing CEOs command top pay, it's the add-ons listed as "Other Compensation" that make most of working America cringe. New government guidelines were implemented to create a more transparent view of CEO compensation. The SEC (Securities & Exchange Commission) corporate filings are so obscured in a chasm of word garbage, it can be mind-boggling just to find the page where the compensation is listed. While working America waits for a layoff notice, files for unemployment compensation or hopes the government will be mailing their Social Security check, corporate CEOs don't have much to worry about, even when their performance isn't stellar. (Find out how to determine whether a CEO is being overpaid. For more, see Evaluating Executive Compensation.)
Here are the top five outrageous CEO spending abuses and perks:
Tax Preparation and Financial Planning Assistance
Despite earning millions in salary and bonuses, one of the most outrageous abuses of company money is being used for tax prep and financial planning.
Ray Irani of Occidental Petroleum whose annual salary is $76.1 million receives $556,470 for tax prep, and $391,107 of financial planning services.
Richard Notebaert CEO of Qwest received $62,000 for tax-consulting services.
The CEO of Black & Decker, Nolan Archibald gets $39,676 for his financial planning, and AT&T CEO Randall Stephenson, gets $14,000 to plan his financial future. (For related reading, see Lifting The Lid On CEO Compensation.)
Tickets to sporting events can be expensive, just ask Chesapeake Energy CEO, Aubrey McClendon. Last year, McClendon spent $5.9 million dollars of his company's money to purchase tickets to the Oklahoma City Thunder's basketball games. McClendon coincidentally is part owner of the team.
We all need to have garage sales for things we just don't use anymore, and corporate CEOs are no different, except they have built in buyers, the company's they work for.
Founder of Pilgrim's Pride, Lonnie Pilgrim dumped personal money into his company to save it from bankruptcy back in 2009. To repay him the company purchased his egg farm for $12 million, in addition to the loan repayment, interest and an annual $1.5 million consulting fee.
CEO Aubrey McClendon of Chesapeake Energy is not only a sports buff, he is a history buff too, selling his antique map collection to his company for $12.1 million.
And CEO Martha Stewart earned $2 million by selling exclusive rights to "film and produce" her TV show to her own company. (Learn more about judging a CEO's performance in Evaluating A Company's Management.)
The Perfect Office
No longer content with the corner office or the penthouse in hues of teakwood, former Merrill Lynch CEO John Thain, whose tenure drove Merrill Lynch to lose $15 billion in the fourth quarter of 2009, spent $1,405 on a trash can. As his company was eliminating jobs, a newly acquired $87,000 rug graced the floor of his office.
Most executives hire interior designers, and Thain was no exception hiring Michael Smith, of celebrity design fame. The tab for his designer office - $1.2 million.
Giving new meaning to relocation expenses, the CEO of Boston Scientific was recently given a relocation and cost of living allowance in the amount of $1.3 million. This compensation was on top of his $33.4 million salary.
The best relocation expense and most outrageous CEO perk goes to James Bernhard CEO of the Shaw Group. Many companies pay their CEOs and corporate executives large amounts of money to "not compete or divulge company secrets" if they are hired by a competing firm. This is standard practice in many businesses, but Mr. Bernhard gets paid to keep his company's secrets even after he is dead. That's right, for two years after he relocates to the great hereafter, his heirs will receive $15 million plus interest to "not compete" after death.
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The Bottom Line
No one expects a top performing CEO not to have some perks, after all that's part of the magic of being a CEO. But when those perks are at the expense of the stockholders and employees, and the company is facing a financial crisis, perhaps boards of directors should rethink their executive compensation packages.
While these are the extreme CEO perks, many corporations have reduced or eliminated such extravagances, and many never offered them at all. (Make sure you assess whether a CEO has a stake in doing a good job for you. For more, see A Guide To CEO Compensation.)