Executive Compensation Report
Perks Still in Play But Sometimes Are Less Lavish
Monday, July 28, 2008
Financial services companies were largely rolling back executive fringe benefits in 2007. But that doesn't mean they were insignificant.
For example, before leaving with a cash severance payment of $3.2 million, Sallie Mae chief executive Thomas J. Fitzpatrick received medical, housing and auto benefits of almost $30,000 last year. Fannie Mae chief executive Daniel H. Mudd got almost $150,000 in fringe benefits, 90 percent related to life and liability insurance coverage and matches for charitable contributions in 2007. His other perks included financial counseling services, an executive health program and dining services.
But by the end of 2007, Fannie Mae started requiring executives to reimburse the company for personal use of company cars and country club memberships. It also stopped paying for personal financial counseling. And earlier this year, Sallie Mae told executives that their perks would be reduced as part of its business restructuring.
"If you take a look at the ugly kind of losses taking place, investors don't want to see executives getting country club memberships, while their stock is going down in value," said Steven Hall, managing director at executive compensation consulting firm Steven Hall & Partners.
Compared with other industries, benefits in the financial services sector have historically been modest, mostly going toward life insurance, retirement accounts and matches for charitable contributions.
"Financial services has generally been on the skinny side on benefits and perquisites," Hall said. "They have a philosophy that says, 'We're going to pay you a lot of money and you go figure out what to do with the money.' "
Companies said the benefits help attract talent, retain high-caliber executives and improve productivity. And so perks like drivers, medical care and financial planning advice remain.
This is a look at some of the compensation besides salary, bonuses and stock awards that Fannie Mae, Capital One, Freddie Mac, Allied Capital and Sallie Mae disclosed in their annual proxy statements. Relatively inexpensive benefits do not have to be disclosed.
Financial Planning Advice
Even financial magnates get help with their personal financial affairs.
Freddie Mac, Sallie Mae and Capital One all offered executives financial counseling in 2007. At least four top Capital One executives received $12,000 in financial planning services in the first nine months of the year, before the company canceled the program. (Chief executive Richard D. Fairbank's contract is renegotiated earlier than other executives', so he got no planning services in 2007.) And before getting pushed out of Sallie Mae in May 2007, Fitzpatrick got $5,550 worth of financial counseling. Sallie Mae cut the program earlier this year.
Executive compensation experts said those programs -- until recently the fastest-growing fringe benefit -- make good business sense. Executives' time may be better spent working than grappling with personal financial decisions. Advisers "can explain the company's programs to the executive, explain what the executive is entitled to and how to get the maximum benefit out of it," Hall said.
The best new executives aren't always local. So companies often pay for relocation costs, which typically include travel, shipping and any losses on their home sale.