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Corporate perks secret no more
SEC forces firms to disclose their execs' freebies
By Aldo Svaldi, Staff Writer
Denver Post
Monday, May 21, 2007

When Bill Barrett retired a year ago as chief executive of the Denver oil company carrying his name, the parting gifts included a $16,863 watch and a $7,000 painting.

EchoStar Communications chairman and chief executive Charlie Ergen adds new meaning to the phrase "frequent flier." Last year, he racked up $821,771 worth of personal flight time on the satellite-television provider's corporate jet.

And ProLogis chief financial officer Dessa Bokides negotiated a deal to have the Denver real-estate investment trust buy her Connecticut home for $5 million.

That purchase, made through a third party, will cost ProLogis an estimated $357,015 in closing costs, commissions and taxes, plus annual maintenance of $44,262. Welcome to the world of corporate perquisites, which this year the U.S. Securities and Exchange Commission is opening to the light of disclosure.

"Under the new rules, all perks and personal benefits have to be disclosed, unless the aggregate amount is less than $10,000," said Warren Troupe, a Denver lawyer at Morrison & Foerster.

Troupe expects the SEC will stand firm on the issue of disclosure. He also predicts that shareholders will question the extra cream that companies are pouring into the coffee of executives already making millions of dollars.

"If you are going to be embarrassed about what you are disclosing, if there is a question, you shouldn't offer it," he advises clients.

EchoStar and ProLogis declined to comment, although Bokides resigned in March after 20 months at the company. ProLogis agreed to sell back her Connecticut home and buy her Colorado home.

Bill Barrett Corp. defended its gifts of a Rolex watch and the commissioned painting that featured its founder.

"They are retirement gifts, nothing that would be extraordinary for a guy who spent 50 years in the business and who has grown shareholder value in several public companies," said Bill Crawford, the company's manager of investor relations.

The Denver Post examined more than 100 proxy statements to determine what kind of perks Colorado executives received last year.

Companies' take on perks

Some companies, including Denver homebuilder MDC, are unabashed about their extra benefits, highlighting their importance.

"The objective of these benefits is to provide conveniences to the CEO and COO that promote their health and welfare and allow them to make better use of their time," the company said in its proxy.

For chief executive Larry Mizel, MDC provided $316,823 worth of personal benefits that included an automobile allowance, club dues, financial-planning services, nonbusiness use of company aircraft and supplemental health insurance.

Other corporations, such as Newmont Mining, play down their packages.

"The company's philosophy is to provide a minimum of perquisites to its executives and generally only when such benefits have a business purpose," Denver-based Newmont stated in its proxy.

Newmont spent $135,285 last year on financial counseling, country- and social-club memberships, family flights on corporate aircraft, preventive medical exams and personal use of administrative services.

Compared with some of Colorado's other large public companies, they were minimal in dollars.

Qwest chief executive Dick Notebaert received $542,109 worth of perquisites, more than four times the amount spent on all the Newmont executives combined. The companies have similar market values.

Although he didn't have the largest perk package, Notebaert had one of the most diverse. His perks included $331,873 in personal use of Qwest corporate aircraft; financial and tax consulting services of $62,202; a personal assistant and related office expenses of $55,921; plus $17,113 for a business-club membership, legal fees relating to compensation agreements, personal ground transportation and his wife's attendance at company-sponsored events.

Qwest also provides a flexible benefit program for top executives to spend on any perks the company might have overlooked.

Notebaert received another $75,000 from that. His total compensation last year was $16.5 million.

"It was something he negotiated with Qwest," said company spokeswoman Diane Reberger.

She added it is important to look at Notebaert's compensation in view of the turnaround he engineered at the company, including a return to profitability and a sixfold gain in Qwest's stock price from its bottom in 2002.

Extra pay for home, car

Relocation expenses, housing allowances and car costs are among the more common perquisites.

First Data covered $53,288 in an apartment lease and related costs for CEO Henry "Ric" Duques, plus $11,000 for an auto lease. He took over at First Data in late 2005.

Incoming Red Robin Gourmet Burgers CEO Dennis Mullen received $60,325 to cover the cost of an apartment and $47,127 in commuting expenses to visit his home in Arizona.

He didn't go hungry, either. Red Robin executives received $5,523 in meal discounts at the restaurant chain.

Chipotle Mexican Grill didn't disclose any free lunches for its executives, but the burrito company covered more than $91,000 in company car costs. Delta Petroleum provided each of its top four execs $18,000 as a car allowance.

Living abroad also can generate some rich perquisites, pushing some foreign-based executives past domestic CEOs.

For his overseas assignment, John Hayes reaped $119,429 in perks, more than all other executives at Ball Corp. combined and more than a third of his base salary of $323,000.

His benefits included $32,026 for children's tuition, $7,729 for his wife's foreign-language training, $63,541 for housing and fees, $5,563 for a company car and $570 for utilities.

"The foreign assignment benefits Mr. Hayes received are consistent with those received by other U.S. employees on foreign assignments," Ball said in its proxy.

He received another $96,900 for working in a country many people pay to visit. Ball Packaging Europe, the unit Hayes heads, is based in Ratingen in northwest Germany.

Beyond providing extra perks, most companies will also foot the bill to Uncle Sam for those extra benefits in what is known as a "tax gross-up."

Some Colorado companies, including a few large ones, limit the "other compensation" they provide to additional insurance coverage and retirement contributions, maybe with some tax assistance.

Janus Capital Group, a Denver money-management company that makes its living off scrutinizing corporate managements, is in that category.

The company said it doesn't give its executives the same perks as its competitors for one key reason: It already pays them enough.

A handful of companies take it a step further. Executive benefits are limited to those also available to the rank and file.

Broomfield-based Level 3 Communications is in that category except for one perk -- personal use of corporate aircraft.

Staying off the corporate jet may not be so easy after all.

Staff writer Aldo Svaldi can be reached at 303-954-1410 or asvaldidenverpost.com.

What they made in 2006

Some of the largest compensation and perk packages offered to Colorado executives last year:

Charlie Ergen
Job: Chairman and chief executive, EchoStar Communications
2006 compensation: $2.8 million
Value of perquisites: $858,171
Aircraft use: $821,771
Other: $37,000 (includes tax-preparation services and additional 401(k) contributions, which aren't classified as perquisites by other companies)

Dick Notebaert
Job: Chairman and chief executive, Qwest Communications International
2006 compensation: $16.5 million
Value of perquisites: $542,109
Aircraft use: $331,873
Flexible benefits account: $75,000
Financial/tax assistance: $62,202
Secretary: $55,921
Other: $17,113 (legal services, business-club membership, ground transportation, spouse attendance at company events)

Larry Mizel
Job: Chairman and chief executive, MDC
2006 compensation: $15.3 million
Value of perquisites: $316,823
Aircraft use: $272,308
Other: $44,515 (includes auto, club dues, financial planning)

Dessa Bokides
Job: Chief financial officer, ProLogis
2006 compensation: $2.3 million
Value of perquisites: $616,418
Relocation: $175,104
Costs associated with purchasing previous home: $357,015
Tax payments: $84,299

Dennis Mullen

Job: Chief executive, Red Robin Gourmet Burgers
2006 compensation: $1.9 million
Value of perquisites: $205,604
Tax payments: $86,531
Housing: $60,325
Commuting: $47,127
Car allowance: $11,077
Meal discounts: $544

One-time severance payouts, retention bonuses, living-abroad differentials, option payments and bonus stock awards not included.

Sources: Company proxy statements

http://www.denverpost.com/business/ci_5945038

Okay so Mullen got screwed in the 'meal discount' category. So what?

This is why I don't invest in public companies. It is one thing to pay a person handsomely for their hard work and competence, but the "compensation" paid to executives is too often ridiculous.

Of course, simultaineously they are claiming labor costs are too high and they'll be moving the operation to Indonesia soon--except for the corporate office..................

Casey

I like that.

These corporate bigwigs are a major part of the problem. They make king's ransom size salaries while at the same time always looking for ways to cut back on the payroll expenditures at the lower levels (i.e. Illegal Mexican laborers). This elitist attitude/approach is a major drag on the economy and will eventually lead to its implosion. Then the USA will truly be a nation of haves and have nots. The corporate leaders living in their gated communities alongside their politican buddies and the rest of us living in mud huts.

HBB

It is the American way! It is always been that way you were just not aware of it. Who cares because it is not going to change so why waste brain cells boo hooing about it?

Yes it sucks and makes my skin crawl but not within my cognizance to reconcile so -- I let it go.

I got a taste of corporate executive excesses recently when my company went public. Of course all these things were disclosed. I was somewhat displeased to learn that while I was having to fight to get raises to bring my salary up to comparable levels with those outside my company, the COO of my company made more in one day (including all his perks and stock options) than I made in a year back then.

If he took a 20% pay cut off of his rediculous $14m a year compensation (leaving him with a skimpy $11m plus), they'd be able to give every employee in the company a $10k raise.

The "base salary" they speek of is penuts compared to their overall compensation package...at least from what I read in my co's prospectus. Bonuses of up to 6 times annual salary. Huh? Bonuses for us employees max out at 5%. Free car. Secretary to work on personal items. Corporate IT crew works on his home computers. Severance package equal to the last 5 years of his total compensation (at current rate, that'd be $70m). Free health care for family for 10 years after seperation. And on, and on, and on.

And I was thrilled when the co. gave me a severance check when they went public! Daayuummm. Shoulda stayed in school and learned how to be a tyrant azzhole I guess!

This is the way the companies work. Why is that a problem? Sure, I wish that I had some perks like that, but I don't... Doesn't mean that others shouldn't have them. The companies should decide how their money is spent, as long as it's not illegal.

One of the nice perks of my job is free tuition for my children at the university where I teach, plus drastically discounted tuition at other universities in the consortium. Both of my children chose to go to and to graduate from the university where I teach. Four years at $35,000 per year means $140,000 each or $280,000 for both. Should I feel guilty about that? I don't... at all. I am proud that my two daughters are two in a very small minority that were able to graduate and have no college loans to pay back.

Penny

If I own stock in the company, than I am a part owner. And then I would have a voice in the how the company is run. This would include employees whose 401K includes shares of the company they work for. That may be DaveR's case.

One of the differences between Barak and I is that I believe altruism not only exists, but is essential to a healthy community. It may not be 100% altruism 100% of the time, but it exists.

As mentioned above, this is one reason why I don't invest in those kind of stocks--it's an inefficient use of my money.

Casey

"As mentioned above, this is one reason why I don't invest in those kind of stocks--it's an inefficient use of my money."

It depends on what type of return you can get for that investment versus other investment opportunities. We've done ok on Intel and others.

cause most here are Capitalists.

tronskie - I believe that the reason you don't see more discussion of this sort of thing is that people have become discouraged about pointing out what they feel are things about our system that perhaps need to be given some honest examination and thought. Too often, the response to such well-intentioned suggestions is a faster-than-the-eye-can-see quick draw that results in the poster lying dead with a "If you don't like it, leave!" bullet between his eyes. This tends to discourage discourse. Just my take on things. John

Would that be a public or private college where you teach? anyway good for you & your kids. This latest article is the CEO that took away benifits promised!! Cut my wife life insured on me from one years pay to $10,000!! Promises are made to be broken when it comes to everyone but yourself??

He's smiling. They're not.
Disconnect: The Qwest CEO's pay package highlights a gulf between executive and employee compensation.
By H. J. Cummings,
Minneapolis Star Tribune
Sunday, May 20, 2007

When Qwest Communications went looking for a new CEO in 2002, Richard Notebaert could play hard to get. The beleaguered telephone company had just forced out its former CEO amid an insider trading scandal.

Notebaert, who'd been CEO at two other telecommunications firms, drove a hard bargain. He negotiated a contract that, among other things, pays for his personal financial planning (plus some extra to cover the income tax he'll owe on that perk) and 5 million stock options. It credited him with 30.4 years worth of service toward his pension on his first day on the job. That gave him a $9 million head start toward retirement.

In 2006 alone, Notebaert's total compensation was about $33 million.

Last year was not so kind to Qwest retirees Mary Ann Neuman and Nancy Meister. Neuman, a 61-year-old New Hope resident, saw her monthly health insurance premium jump 79 percent, from $124 to $222. Meister, 57, of Plymouth, got word her former employer was cutting her company life insurance policy to about 15 percent of the payout she'd been promised.

Qwest says the reduced benefits for retirees have been made necessary by the increased costs it faces. But the contrast between the treatment afforded the CEO and the rank and file isn't limited to Qwest.

Top executives are being paid 262 times the average worker's wage, up from a multiple of 24 about 40 years ago, according to the Economic Policy Institute's most recent analysis in 2005. The gap widened significantly in the 1990s, in part because of the generous use of stock options in executive pay packages.

Chuck Denny, retired CEO of ADC Telecommunications Inc. in Eden Prairie, sees a broad challenge stemming from the growing pay gap, a violation of the social contract of democratic free market capitalism.

"It has always been assumed that we'll allow some people to make vast amounts of money, as long as everyone else sees their standard of living increase," Denny said. "This compact is being broken."

Institutional Shareholder Services, a Wall Street research firm, calculated that for every $100 in 2006 net income at the 38,000-employee Qwest, $4.16 went to its CEO.

Meanwhile, Qwest call center workers have complained in federal court that the company has been forcing them to work overtime without pay.

Nikie Graham, 22, of Roseville, is part of the Minnesota lawsuit that challenges conditions in Qwest's St. Paul call center, where Graham worked in 2004 and 2005. The regular demands of the job -- like starting 10 to 20 computer systems and programs to be ready for calls when their shifts began -- tacks about half an hour onto everyone's work day, Graham estimates. "I worked a lot of time that I didn't get paid for, and it wasn't right," she said.

Qwest, which is based in Denver and has about 4,200 employees in Minnesota, denies the allegations. But Graham's attorneys have won the first in a two-step process to take the case national, after hearing from Qwest call center workers in 11 other states.

Reward without risk

Extraordinary CEO pay these days turns another core capitalist principle on its head -- that great rewards go to those who take great risks -- said Stephen Young, executive director of the Caux Round Table in St. Paul, an international network of business leaders that looks at business standards.

Working Americans are bearing the risks of layoffs, outsourcing and lost retirement benefits, Young said. At the same time, top CEOs increase their multiples of pay and lock in their own retirement benefits.

For example, Notebaert has both regular employee and special executive pensions at Qwest, with a current combined value of $10 million. He has retiree health coverage from another employer, but Qwest promises that if that goes away for any reason, it will cover him. Qwest also will set him up with a private office for the rest of his life, worth $3.5 million, plus $2.2 million to cover the income taxes he'll owe on that.

"The Notebaert retirement -- that's all completely risk-free," Young said. "And health coverage? He's going to be covered one way or another. [Some] people are going to have a lot of fun trying to live on Social Security, while this guy is not."

Qwest spokeswoman Diane Reberger said changes to workers' and retirees' benefits were a prudent response to changes in the costs of providing such compensation.

"It was a difficult decision, and not one taken lightly," Reberger said.

She added that Notebaert has earned his pay. Qwest stock now trades at about $10 a share, up from $5.16 on the last day of May 2002. Total return to Qwest shareholders for the period is about 88 percent, compared with about 54 percent for the Standard & Poor's 500 index.

"Look at his compensation in terms of how the company has performed," she said. "We just reported our fifth consecutive quarter of profitability. Cash flow and margins have improved, and customer service scores are at an all-time high. Across the board, the company has made dramatic improvements."

However, the company also credited decreases in operating and benefit expenses in announcing its first-quarter gains this year.

The perks list

In its proxy statement, the company reported that Notebaert earned almost $33 million in 2006, including $1.1 million in salary, $4.1 million in bonus, $760,000 in perks, $18.4 million in stock options he exercised, and $8.4 million in stock grants that vested last year.

The filing also details for the first time Notebaert's package of perquisites, a new reporting requirement for all public companies in 2006. His perks include: $331,873 for use of the corporate jet, including travel by his wife; $55,921 for a personal assistant and office, and $17,113 for miscellaneous items such as club memberships and personal ground transportation. In addition, he's paid $75,000 for any other perks of his choice.

Notebaert's contract and the company's financial performance earned Qwest a place on the list of 12 worst companies in a "Pay For Failure" report by the Corporate Library, a Maine-based corporate governance research organization released earlier this month.

Qwest's Reberger called the report unfair because it covers 2001-2006 and Notebaert didn't join Qwest until 2002. "It's just not an apples-to-apples comparison," she said.

The report's author, Paul Hodgson, stands by the analysis.

"My contention is he has been compensated extremely handsomely for what shareholders would see as an OK record in the last two to three years," Hodgson said.

H.J. Cummins � 612-673-4671 � hcumminsstartribune.com

I'm not completely sure this is such a big deal. A few years ago, some sports team owner's bizjet came through here (I don't remember the details, although I'm pretty sure the plane's registration number ended in Charlie Charlie) and I got to talk with the pilots for a bit. It was a Gulfstream III, like the one below, and the guy said it cost about $31,000 per hour (wet) to fly. I don't know what kind of bizjet this guy flew in, but if it was comparable, we're talking about something like thirty hours in a year, which isn't much. I fly something in the neighborhood of that often (but for more like $100/hr), and I can testify to how little it is.

I like that--it's a truism.

Casey

[quote=BarakI'm not completely sure this is such a big deal. [/quote]

Off subject, in my neck of the woods the ultra-wealthy have discovered Telluride and my valley . I reluctantly bid a job to stain a certian New York fashion designer's (Polo shirts and that sort of thing) high dollar rustic fence on his 10,000 acre ranch (usually I do industrial tech coatings--but I couldn't pass up the bucks).

The stain was a special color, special formula that was made in Sweden. They ordered less stain than I told them (the manufacturer recommendations were wrong). When I ran short of material, I told them to give me a call and I'll get back and finish up when I can. They panicked. And promised me they would have the stain the next day.

A phone call to NY put the Gulfstream G1 on a fast flight to Sweden to pick up 15 gallons of stain, and I met the G1 at the airport in Western Colorado to pick it up.

At that time I think the pilots told me that was about a 20 hour flight from NY, to Sweden, to Colorado.......at about $5500 an hour.............all for 15 gallons of paint.

I got other stories just as outrageous........

CAsey

Only thing I piss & moan about is a post that is more than 2 sentences long, cuzz I ain't reading the damn thing...

Actually I'm happy for long posts, less to read..

Expand your horizons--work up to two paragraphs...but carefully.

Casey

A taller pile of [bleep] don't change what it is....

Ya mean there is short piles and tall piles?........

Casey