It’s no surprise that companies are scaling down perquisites for their chief executives. Throughout 2008 and early 2009, executive compensation became one of the highlights of what was wrong with Corporate America. Excessive paychecks and expensive perks fueled the anger of a downtrodden public. With shareholders experiencing extensive financial losses and companies receiving tax-payer-funded bailouts, the public demanded that the c-suite curtail spending and focus on rebuilding a sustainable financial future. A new report by Equilar demonstrates that during the year leading to 2009’s economic downturn, the prevalence of “key” perquisites actually increased overall from 2007 to 2008. Only compensation and nonqualified deferred compensation plans saw a drop in 2008.
Among Equilar’s findings:
- In 2008, CEOs at Fortune 100 companies received $348,101 in total other compensation compared to $356,175 in 2007.
- Use of the corporate aircraft by Fortune 100 CEOs rose by 28.9 percent from 2007 to 2008, increasing from $109,743 to $141,477.
- In 2008, 74 percent of Fortune 100 companies reported an increase in pension benefits for their CEO–$10.7 million in 2008 compared to $10.3 million in 2007.
- Median value of nonqualified deferred compensation plan balanced fell from approximately $4.8 million in 2007 to $3.6 million in 2008.
- In 2007, 21.1 percent of Fortune 100 companies reported eliminated perquisites, compared to 29.2 percent in 2008.
In 2009, public backlash led to the decline of many of these perquisites. David Sasaki, associate research manager at Equilar notes that overall perquisites began to decline after the big three automakers used corporate planes to travel to Washington while requesting a taxpayer-funded bailout. “The area that has seen the most scrutiny is tax gross-up payments on perquisites, where companies pay for the taxes incurred from the receipt of a benefit such as personal aircraft usage,” adds Sasaki. “At least 11 Fortune 100 firms have cut this benefit and there are likely more since the data for this report was gathered.”
With new Securities and Exchange Commission disclosure rules in effect for three years, it is now possible to compare data from fiscal years 2007 and 2008. In 2008, 29.2 percent of Fortune 100 companies reported the elimination of certain perquisite programs. These cuts either occurred during 2008 or will occur in the upcoming 2009 fiscal year. According to Equilar, among companies eliminating executive perquisites in 2008 and 2009, tax reimbursements, financial planning, and personal use of corporate aircraft were discontinued most frequently.