Before loans to officers and directors were banned in 2002 by the post-Enron corporate governance reforms, Fairchild extended no-interest loans totaling more than $500,000 to Steiner and two of his children, who worked at Fairchild, according to company filings. The loans were meant to encourage ownership of Fairchild's stock and "provide additional incentive to promote our success," the company reported.
In recent years, Steiner has gotten approval to receive $4.6 million from executive retirement plans without having to retire. Foley, the executive compensation consultant, said it was unusual for a chief executive to tap his retirement plan before retiring.
Fairchild's chairman and chief executive, Jeffrey J. Steiner, has headed the firm since 1985.
(Mitsu Yasukawa For The Washington Post)
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_____Compensation Report_____
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The Region's Highest-Paid Executives (The Washington Post, Aug 16, 2004)
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Pay for XM Executives Modest as Stock Recovered (The Washington Post, Aug 16, 2004)
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Board Members, Executives and Family Members Can Still Benefit (The Washington Post, Aug 16, 2004)
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Expense Issue Draws Mixed Views From Companies (The Washington Post, Aug 16, 2004)
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Survey Estimates Values of Options, Excludes Exercises (The Washington Post, Aug 16, 2004)
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"It doesn't seem justified that the company should start paying out until they've finished paying salary and benefits of the executive," said Paul Hodgson, a compensation analyst at the Corporate Library, which provides information for institutional shareholders.
All of Steiner's retirement advances disclosed in its last annual proxy report, almost $1.7 million, came from an unfunded plan for Fairchild executives, according to the filing.
Fairchild reported that it paid $568,000 in fiscal 2003 to charter an aircraft owned by "an affiliate of Mr. Jeffrey Steiner." The company didn't identify the affiliate or explain the nature of the affiliation, but it said in another SEC filing that all of that money was a "prepayment . . . for the future use of the aircraft." Fairchild said it paid $308,000 for use of a helicopter owned by a Steiner company.
Fairchild reported that it paid 5 percent less than the going rate for the helicopter and market rates for the other aircraft.
As a general matter, owning an aircraft and leasing it an generate tax benefits.
Starting Jan. 1, 2003, Steiner deferred 20 percent of his base salary, the firm's proxy report said without explanation. Yet by June 30 of last year, Fairchild had paid $258,000 for "personal expenses" of Steiner, the company reported. Steiner reimbursed the company in August 2003, the company reported.
Fairchild did not explain the specific nature of the expenses, over what period they were incurred, why the company paid or whether Steiner paid the company interest on the money.
If somebody determined after the fact that the company had paid expenses that were personal rather than business, "it could be that it was in effect an unauthorized loan," said Lyman Johnson, a professor of corporate law at Washington and Lee University. But Johnson added that "if it's an innocent mistake, then I don't think that any sanction should follow."
