Len Boselovic’s Heard off the Street: Despite critics of corporate pay, perks persist
May 23, 2016 12:00 AM
43 percent of S&P 500 companies make their corporate jets available for their CEO’s personal use -- global advisory company Willis Towers Watson
By Len Boselovic / Pittsburgh Post-Gazette
Webster defines perquisite as: “a profit or payment received in addition to a regular wage or salary, especially a benefit expected as one’s due.”
Although perks such as the use of the corporate jet and “gross ups” — taxes that companies pay on behalf of their executives — have drawn criticism from the good governance crowd, fringe benefits remain an enduring feature of the executive pay landscape.
Corporate consultant Willis Towers Watson reports 82 percent of the companies in the S&P 500 provided their CEO with at least one perk and 47 percent provided at least three, according to pay plan disclosures the companies made in 2015. The most popular fringe benefits were use of the corporate jet; financial and tax planning assistance so CEOs can manage the money they make wisely; and a company car or car allowance.
The consultant believes that, for the most part, companies “are keeping only those perks deemed essential to the CEO’s efficiency and security.”
The beneficiaries of this largesse include the Post-Gazette’s Fortunate 50 as well as other executives at regional public companies who did not make the $3.3 million required to qualify for this year’s roster of top paid executives.
First among them is Mylan president Rajiv Malik, whose total 2015 compensation of $19.9 million made him the region’s second-highest paid executive.
But he finished first in perks with $11.4 million. They included $6.3 million in income taxes the generic drug maker paid for Mr. Malik last year because he works in the U.S., not India. The total also reflects $4.9 million in excise taxes Mylan paid for him in connection with the company’s acquisition of Abbott Laboratories’ overseas generic drug business last year.
Mylan paid a total of $17.1 million in excise taxes for Mr. Malik and four other executives in connection with the Abbott transaction.
The perks that 11 of the Fortunate 50 executives received included use of a corporate jet. Mylan executive chairman Robert J. Coury topped the list with a value of $605,255, marking the eighth consecutive year he placed first in the category. Mylan CEO Heather Bresch finished second in corporate jet use with $310,312.
According to a filing that Mylan made with the U.S. Securities and Exchange Commission last month, the company requires Mr. Coury and Ms. Bresch to use corporate jets for business as well as personal travel. The company’s jets provide “a more efficient and secure traveling environment, including where sensitive business issues may be discussed or reviewed, as well as maximum flexibility,” Mylan stated in the filing.
Other companies feel the same way. Willis Towers Watson said 43 percent of S&P 500 companies make their corporate jets available for their CEO’s personal use.
The consultant said the perk had a median value of $103,799, meaning half of the executives used the jet more than that and half used it less. A little more than a third of the companies disclosed that they require the CEO to use the jet for all business and personal travel, the consultant said.
“Providing a secure means of travel helps ensure that leadership is focused on company business with minimal distraction,” the consultant reported.
U.S. Steel president and CEO Mario Longhi’s $1.1 million in 2015 perks included $210,458 in corporate jet use as well as a personal security detail valued at $275,936.
The distressed Pittsburgh steel producer provided gross ups worth $391,098 to three executives who did not qualify for the Fortunate 50 list. The payments covered taxes the executives owed for relocation benefits U.S. Steel provided. The executives were chief financial officer David B. Burritt and senior vice presidents Suzanne R. Folsom and Geoff M. Turk.
Club dues are another popular perk, with 12 percent of S&P 500 companies paying them for their CEOs, according to Willis Towers Watson. The consultant reported that the benefit had a median value of $9,512.
Koppers Holdings CEO Leroy M. Ball’s $2.9 million compensation left him about $350,000 shy of making the Fortunate 50. But the $68,926 Koppers paid in club dues for Mr. Ball was more than any of the 36 other companies analyzed for the Fortunate 50 paid to more than 100 executives, according to filings reviewed for the rankings.
The next closest were Wesco International chairman, president and CEO John J. Engel, who benefited from $20,212 in club dues payments, and FNB president and CEO Vincent J. Delie Jr., whose perks included $19,548 in club dues.
Len Boselovic: email@example.com or 412-263-1941.
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