At rescued banks, perks keep rolling
NEW YORK -- Even as the nation's biggest financial firms were struggling and the federal government was spending hundreds of billions of dollars to save many of them, the companies as a group were boosting the perks and benefits they pay their chief executives.
The firms, accounting for more $350 billion in federal bailout funds, increased these perks and benefits 4 percent on average last year, according to an analysis of corporate disclosures filed in recent months.
Some chief executives, such as Kenneth D. Lewis of Bank of America and Jeffrey M. Peek of CIT Group, the major small-business lender now on the brink of bankruptcy, each received about $100,000 more than a year earlier for personal use of corporate jets. Others saw an increase in the value of chauffeured services, parking or personal security.
Ralph W. Babb Jr., chief executive of Dallas-based lender Comerica, was compensated for a new country club membership, with an initiation fee and dues of more than $200,000. GMAC Financial Services chief executive Alvaro de Molina benefited from a $2.5 million payment from his company to help cover his personal tax bill.
"You would have thought that this would be the moment when everyone said, 'Okay, the perks have got to stop -- at least while we're indebted to the government,' " said Paul Hodgson, senior research associate at the Corporate Library. "But that didn't happen."
This year may turn out to be different. In June, the Treasury Department prohibited companies receiving bailout funds from reimbursing senior executives for their personal tax payments.
In the meantime, Kenneth R. Feinberg, the Obama administration official assigned to set pay for top executives at seven of the companies receiving the most help, plans to curtail perks such as country club fees when he rules on compensation later this month, according to people familiar with the matter. Perks worth more than $25,000 are getting particular scrutiny from Feinberg.
On average, the chief executives at 29 of the largest public financial companies that have taken bailout funds received perks and benefits worth more than $380,000 in 2008, according to compensation figures included in annual proxy statements and supplied by Equilar, a compensation data services firm. Individually, about half the banks increased their fringe benefits to the top executives. The figures do not include relocation costs and related taxes, typically one-time fees that can skew year-over-year comparisons.
In contrast to the 4 percent average increase in perks and benefits at these companies, the average awarded to top executives at non-financial companies in the Fortune 100 declined by more than 7 percent over the same period, according to Equilar.
Personal use of corporate aircraft and "gross-ups" -- when the company pays taxes due on bonuses or other benefits -- represented more than half of the $11 million in non-cash pay awarded to the 29 chief executives in 2008. Among the more common perks were company cars and drivers, as well as personal financial and tax-planning services.
Although perks represent a relatively small portion of an executive's overall compensation package, they have been targeted some shareholders who argue that these fringe benefits are meant largely to stroke the egos of top company brass.
"These executives are already well compensated," said Daniel Pedrotty, director of the AFL-CIO's office of investment. "The notion that some of these folks can't even leave a nickel on the floor, that they want to take every last dime and put it on the company card really rubs people the wrong way but points to a larger problem of lack of independence at the board."