April 19, 2006

Those Big Numbers Keep Rolling In

With proxy season in full swing, I fear picking up the paper in the morning since it seems like there is a new story of a CEO making a killing at the expense of shareholders each and every day. Since our mission attempts to focus on the positive – such as these CEOs That Have Set An Example – I have refrained from carping on some of the mind-numbing CEO pay levels that have been disclosed recently.

I can’t help but wonder how the boards reacted at these companies when they realized that they have doled out pay packages that have reached payouts in the aggregate that exceed a billion dollars (yes, that’s billion with a “b”). You would think that their reaction would be a “Holy Cow” moment. If not, maybe they have served on the board too long?

And as Mike Melbinger has been discussing in “Melbinger’s Compensation Blog,” it appears that the culture of greed has spawned more allegations of suspicious timing of option grants to senior managers. [Get a load of today’s WSJ story about the UnitedHealthcare CEO who now wants to rein in his – and other senior managers – pay. Easy for him to say now that he has over $1.6 billion in unrealized option gains. With rampant allegations of option-backdating, this guy is backpedaling fast.]

It looks like a good time for all of us to get a refresher on responsible pay practices in next week’s webcast on “What the Top Compensation Consultants Are NOW Telling Compensation Committees!

Whole Lot of “Perking” Going On

On his “Proxy Disclosure Blog,” Mark Borges has provided numerous examples of what companies are disclosing now about perks – and there have been a fair number of interesting disclosures. Mark’s analysis of proxy statements as they have been filed has been invaluable to those of us grappling with the SEC’s changing expectations.

For a more humorous – and more critical – take on recent perk disclosures, check out Michelle Leder’s Below is one of my favorites from the related party category…

Driver’s Ed on the Company Dime…

From “As with many professional sports, making it to the top of the professional racing circuit can take years of hard work and plenty of near-death experiences. Michael Waltrip, pictured here with his car, is one of the success stories. Now Waltrip’s company is helping two sons of Aaron’s Rent (RNT) executive Bill Butler train to become race car drivers courtesy of the company. In the proxy that the company filed on Friday, the company noted that Aaron’s is sponsoring Waltrip’s “driver development program” and that the two drivers participating in the program in 2005 are Butler’s sons. But here’s the real kicker: Aaron’s estimates that it paid $890K last year to train Butler’s sons and will spend nearly $1 million this year on the program.

So what exactly are the Butler boys — known as KBIII and Brett — learning for this money? This article that was sent out to Aaron’s franchisees details the program:

During the work week, KBIII and Brett learn about the cars they race and how to build them, repair them and make them perform faster. They train their bodies for the rigors of racing. They learn strategies for winning races. Then, come the weekend, they put it all to the test.

We’re guessing that since dad — Aaron’s Sales and Lease Ownership President Bill Butler — only made $425K last year, paying twice that amount to teach your sons to be professional drivers was probably out of the question. But getting the company that you work for to pay for that training and counting it as a marketing expense, seems like a very creative use of accounting rules.”

Personal aside: I don’t know about you, but I hated driver’s ed. Creepy phys ed teacher and I already could drive better than him. Can you believe there is a forum where folks discuss bad driver’s ed experiences…and then you have this movie entitled “Hell’s Highway – The True Story Of Highway Safety Films”…