Bailed-Out Firms Post Expense Rules
Saturday, September 12, 2009
NEW YORK, Sept. 11 -- Chrysler Financial employees traveling on business can no longer be reimbursed for lunch on trips that don't require an overnight stay. If flying on business, they must travel coach if the flight is less than four hours. Tips to baggage handlers shouldn't exceed $2 per bag. The $4 paid for the in-flight movie? Not reimbursable.
The company's new expense rules, posted on its Web site Friday, are among a handful of policies that have been made public so far as hundreds of companies receiving federal rescue funds scramble to meet a deadline Monday to put in place an "excessive or luxury expenditures" policy.
Under rules issued by the Treasury Department in June, the boards of directors of companies receiving federal assistance must adopt company-wide policies on luxury expenditures -- including entertainment, office renovations and air travel -- and make them available online.
First, There Was Outrage
The requirement was part of the new restrictions on executive compensation in the $787 billion stimulus bill signed into law by President Obama in February, at the peak of a populist outcry over billions in bonuses paid to executives at companies that received taxpayer assistance.
Merrill Lynch's then-chief executive John Thain was pilloried in January for spending $1.2 million to renovate his office, including $87,000 for an area rug, even as the investment bank faced billions in additional losses and was acquired by Bank of America. Northern Trust was sharply criticized for sponsoring a golf tournament with lavish side events and Detroit's Big Three auto executives received a public scolding from lawmakers for flying private jets to a hearing in Washington.
One Size Does Not Fit All
The policies adopted so far vary greatly.
The law requires that the companies have a policy regarding luxury expenses and largely does not dictate the content of the policies. It does say that prohibited expenses and those needing prior approval must be identified, and it mandates prompt internal reporting of any violations.
While some are barely a page long, the policy adopted by Chrysler Financial, among the seven companies under the greatest government scrutiny after receiving multiple infusions of taxpayer funds, goes to lengths to define acceptable spending.
Of those seven firms -- Bank of America, Citigroup, American International Group, Chrysler, Chrysler Financial, General Motors and GMAC -- only Chrysler Financial and Bank of America had made their policies available as of Friday.
Chrysler Financial details what type of rental car employees should drive while on business trips (mid-size), how to calculate reimbursable gas mileage on trips combining business and personal purposes, and the circumstances under which it is permissible to use the phone in your hotel room. The 15-page policy comes with two appendixes, one listing "unallowable" expenses (country club fees, hotel frequent-guest programs, birthday cakes and cards, shoeshines) and limits on tips (up to 20 percent of total bill, excluding tax, for room service, up to $2 for buffet dining, $5 for doorman, no tip for concierge).
In comparison, Bank of America's policy is much less detailed. Regarding events, the bank says location, venue, food selections and entertainment are determined based on the revenue-generating potential, among other factors. On office renovations, the policy defines as excessive any materials that are "unreasonably above and beyond standard." Reviews for exceptions, the policy says, "could potentially be escalated to senior management for approval."
Citigroup and AIG said they would post their policies Monday.