TheCorporateCounsel.net

December 12, 2006

Our “What is a Perk” Survey Results

After a little more than a month, we have wrapped up our popular “What is a Perk” survey, with many members providing their input. The survey results are quite lengthy and come with a big fat disclaimer that they do not necessarily reflect what the actual law is (and don’t forget to take our new survey on related-party transaction procedures and policies):

A. Company Airplane Use

1. Spousal/family member tag-along on corporate plane where executive is flying for business reasons (assume no incremental cost of tag-along):

– Definitely a perk – 42.3%
– Leaning toward a perk – 26.2%
– Leaning toward not a perk -17.2%
– Definitely not a perk – 14.3%

2. Spousal/family member tag-along on corporate plane where executive is flying for personal reasons (assume no incremental cost of tag-along):

– Definitely a perk – 76.6%
– Leaning toward a perk – 8.6%
– Leaning toward not a perk – 5.0%
– Definitely not a perk – 9.7%

3. Executive use of corporate plane for outside board meetings (i.e., director of another company):

– Definitely a perk – 60.5%
– Leaning toward a perk – 22.1%
– Leaning toward not a perk – 9.4%
– Definitely not a perk – 8.0%

4. Outside director’s use of corporate plane to attend company’s board meeting (i.e., picking up directors for meetings):

– Definitely a perk – 9.1%
– Leaning toward a perk – 11.6%
– Leaning toward not a perk – 18.8%
– Definitely not a perk – 60.5%

5. Executive use of corporate plane to attend a meeting of the board/trustees of a charitable organization:

– Definitely a perk – 50.7%
– Leaning toward a perk – 29.0%
– Leaning toward not a perk – 13.8%
– Definitely not a perk – 6.5%

B. Other Spousal/Family Member Issues

1. Travel costs associated with spouse attendance with directors at annual board retreat/meeting where all spouses are invited:

– Definitely a perk – 37.4%
– Leaning toward a perk – 28.2%
– Leaning toward not a perk – 18.7%
– Definitely not a perk – 15.8%

2. Travel costs associated with spouse attendance with directors at a board meeting where spouses are welcome, but not formally invited, and only a few spouses attend:

– Definitely a perk – 65.9%
– Leaning toward a perk – 25.6%
– Leaning toward not a perk – 6.3%
– Definitely not a perk – 2.2%

3. Spousal golf and other extra services, such as day travel or spa services, for when the board is in a formal meeting:

– Definitely a perk – 78.8%
– Leaning toward a perk – 13.6%
– Leaning toward not a perk – 4.4%
– Definitely not a perk – 3.3%

C. Mixed Business and Personal Use

1. Country club membership paid by company that is not used exclusively for business purposes, if the membership is used a few times by the executive or a family member for personal reasons:

– Entire amount of country club expenses is a perk – 26.6%
– Allocate incremental cost of those few personal uses as a perk – 47.6%
– Allocate all expenses, including a portion of the membership cost on some basis, as a perk – 22.5%
– Not a perk – 3.3%

2. Luxury box paid by company that is not used exclusively for business purposes, if the box is used a few times by the executive or a family member for personal reasons:

– Entire amount of ownership expenses is a perk – 11.7%
– Allocate incremental cost as a perk (eg. cost of refreshments) – 43.8%
– Allocate all expenses, including a portion of the membership cost on some basis, as a perk (eg. by dividing number of events box is paid for in order to allocate the cost on a per event basis) – 36.4%
– Not a perk – 8.1%

3. Membership in airline club paid by company that provide facilities at airports, if the club is also used by executive during personal travel:

– Entire amount of club expenses is a perk – 14.0%
– Allocate incremental cost as a perk (eg. cost of refreshments) – 34.7%
– Allocate all expenses, including a portion of the membership cost on some basis, as a perk (eg. valuation based on percentage of personal use) – 19.9%
– Not a perk – 31.4%

4. Relocation expenses for existing executive that the company has required to relocate:

– Definitely a perk – 17.7%
– Leaning toward a perk – 7.8%
– Leaning toward not a perk – 13.3%
– Definitely not a perk – 61.3%

5. Relocation expenses for newly hired executive, extended to induce the executive to accept an employment offer:

– Definitely a perk – 23.3%
– Leaning toward a perk – 11.8%
– Leaning toward not a perk – 11.4%
– Definitely not a perk – 53.5%

6. CEO’s assistant (whose compensation is paid for entirely by company) who spends 60% of his time taking care of personal tasks (such as maintaining the CEO’s personal calendar, paying personal bills, etc.) and the other 40% is work-related:

– Definitely a perk – 35.1%
– Leaning toward a perk – 39.1%
– Leaning toward not a perk – 16.2%
– Definitely not a perk – 9.6%

D. New Questions Added After Initial Survey Posting

1. Would your answers change to the above questions if the executive paid the full incremental cost to the company?

– Yes to most – 44.2%
– Yes to a few – 27.9%
– Maybe for a few – 11.1%
– No – 16.8%

What is an Abusive Perk?

A while back, a USA Today reporter wrote an article illustrating how country club memberships are a common perk for CEOs (note the survey results above regarding whether country club memberships are perks). Below is a list of perks that also are common that I would view as more abusive than country club memberships:

Financial planning – We’ve paid them so much that they cannot even manage it and now we have to pay for the manager and tax planning? I just don’t see any basis for it and the amounts generally are insignificant.

Commuting costs – If an executive has elected not to live near the company, that’s a lifestyle or family choice and not a company expense (although executives more and more commute from the East Coast across country on a regular basis).

Tax payments, including gross-ups – This is the one (although not technically disclosable as a perk) that is really radioactive with investors.

Cell phones – Small amounts, but are you saying they would not have one if not for the company needing to be able to reach them? Of course, this one hits home for many of us since lawyers often get reimbursed for their cell phones.

On footnoted.org, Michelle Leder regularly analyzes perk disclosures and has found some pretty wild ones over the years. I found this recent one on Oracle’s Larry Ellison to be provocative – $1.8 million on home security?

Wanna Be A Frillionaire?

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