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Network World - Executive perks are a lightning rod for shareholder criticism, and many tech companies are cutting back on CEO extras to avoid a negative outcry. But some perks -- like personal use of corporate jets -- are proving hard for executives to relinquish.
BY THE NUMBERS: Perks drive up pay for tech CEOs
A big driver of perk reductions is the new "say on pay" rule, which requires public companies to seek approval of their compensation plans via a shareholder vote. The SEC adopted the rule as required under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010.
"Say on pay" has been "a very scary development" for most compensation committees, says Nora McCord, managing director at Steven Hall & Partners, an executive compensation consulting firm based in New York. While the result of a say-on-pay vote is nonbinding, "it has served to ratchet up even further the focus on compensation issues in general and, most specifically, the hot-button issues like perks," McCord says.
One company that has slashed its executive extras is AT&T. CEO Randall Stephenson saw the value of his perks cut 52% from $864,632 in 2009 to $417,410 last year. The biggest hit was to club memberships. AT&T paid $215,954 for Stephenson's club memberships in 2009 and just $15,174 in 2010.
The trend is irreversible, predicts McCord.
"The company car is going away quickly. Club memberships are gone, by and large. Preferential earnings on retirement accounts are fading. Executive physicals have stayed but are starting to go," she says. "Five years from now, I think we'll be in an environment where those types of perks don't exist."
While the trend is to cut back on CEO perks, some extras are sticking around. In particular, using the company jet for personal travel is a pricey perk that many tech CEOs treasure. "It's the one perk executives are the least willing to give up," McCord says.
One frequent flier is IBM CEO Sam Palmisano, who received $311,288 for personal use of company-owned aircraft in 2010.
The CEOs of newly split Motorola are also among the heavy users of company jets. Sanjay Jha, CEO of Motorola Mobility, netted $186,189 for personal use of company aircraft. Greg Brown, who runs Motorola Solutions, received $133,530 for the same perk.
Other CEOs accustomed to using company jets for personal travel include former HP CEO Mark Hurd (to the tune of $158,816); EMC CEO Joe Tucci ($134,684); former CA CEO John Swainson ($106,589); AT&T's Stephenson ($77,182); CA CEO Bill McCracken ($25,427); and interim HP CEO Cathie Lesjak ($20,249).
Another perk that's nonnegotiable for some companies is personal and residential security for the CEO. Proponents view it as a legitimate business expense, since safeguarding the CEO is effectively a benefit to the business that not only minimizes corporate risk but also is aligned with the interest of shareholders.
Last year Oracle paid $1.5 million for security-related costs and expenses for CEO Larry Ellison's residence. Likewise, HP paid $362,899 for home security for ex-CEO Hurd, IBM spent $55,465 for Palmisano's home security, and AT&T spent $30,504 for Stephenson's.