Are CEOs Too Insecure?

Many companies have visionary chief executive officers whom shareholders appreciate very much. I hate to think what kind of mass freak-out might ensue if anything ever happened to Apple's (Nasdaq: AAPL  ) Steve Jobs, for instance. However, corporations that shell out piles of cash to keep their CEOs secure might ultimately endanger their shareholders' investments.

A sign of the times?
We're in the thick of proxy season, and more people have their eyes on executive compensation this year. With costly CEO perks getting a lot of attention in 2009, some companies are realizing that the executives to whom they already pay top dollar might be able to afford their own darn security.

Eastman Kodak (NYSE: EK  ) and Deere (NYSE: DE  ) both announced that they would no longer pay for home-security systems for their CEOs. Their moves could be part of a growing trend.

For example, some companies paid less for security costs for their CEOS last year. Google (Nasdaq: GOOG  ) paid 42% less to keep Eric Schmidt safe this year. After shelling out $1.1 million for Schmidt's security since 2007, the company's tab fell to $233,542 this time around.

Although CEO pay and perks have shown some signs of receding, a few companies paid more for their chief executives' security last year. The price tag to protect Starbucks' (Nasdaq: SBUX  ) Howard Schultz increased 25% to $640,000 in 2009.

Amazon.com's (Nasdaq: AMZN  ) Jeff Bezos didn't receive an increase to his base salary last year, but his overall compensation rocketed up by 39%, as the company spent a whopping $1.7 million on various types of security for him.

You're too insecure
In contrast to country club memberships, private jets, and golden toilets, spending shareholder money to protect visionary, high-profile CEOs is admittedly far more defensible. A boss who loses sleep worrying about his or her safety might come up with fewer great ideas, or make fewer sharp decisions. And a society that makes CEOs into superstars also exposes them to the sort of attention that could make them targets.

Still, some companies don't list any security expenses for their high-profile heads at all, including businesses run by such shy, obscure types as Apple's Jobs and Microsoft's (Nasdaq: MSFT  ) Steve Ballmer.

Too many perks for jet-set jerks?
I see why these individuals need security; I'm just not sure that shareholders ought to pay for it. Most high-profile CEOs make very high base salaries and bonuses. With the wealth they amass over their careers, I'm pretty sure that most of them can afford their own security expenses, if they want such measures. After all, with the exception of health insurance, most of the rest of us don't ask our employers to foot the bill for our personal business.

Besides, lavish security bills are just another part of the larger problem of perk abuse among CEOs. Abercrombie & Fitch (NYSE: ANF  ) is paying CEO Mike Jeffries $4 million to limit his personal use of the corporate jet, to name just one egregious recent example.

CEOs who gain superstar status may also start to believe they're above everyone else. As much as I respect intelligent, accomplished folks who achieve great things in the business world, I still have to acknowledge the destructive potential of ego and hubris. At some point, CEOs ought to come down and join the rest of us here on Earth. If they feel the need for a heavily fortified compound, they're free to pay for it themselves -- but it might get awfully lonely in there.

Do companies that foot the bill for CEO security help you sleep better at night? Or should these well-paid folks shell out for their own safety. Sound off in the comment box below.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on corporate governance. 

Apple and Starbucks are Motley Fool Stock Advisor picks. Microsoft is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Motley Fool Options has recommended a diagonal call position on Microsoft. Try any of our Foolish newsletters free for 30 days.

Alyce Lomax owns shares of Starbucks. The Fool has a disclosure policy.


Read/Post Comments (7) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 16, 2010, at 4:50 PM, lemoneater wrote:

    Wow, I cannot imagine spending such astronomical amounts on security. I remember reading a Forbes article that said the biggest worry for the very rich was security. Just think of all the money I'm saving by not being wealthy?!?!

    Give me a clear conscience and a couple dogs.

  • Report this Comment On April 16, 2010, at 7:37 PM, donbcms wrote:

    With the amounts that most CEO's receive, the question of "Security" should be solely a matter of their own choice, NOT the shareholders! !

  • Report this Comment On April 17, 2010, at 10:29 AM, TMFLomax wrote:

    Yeah lemoneater, it does make sense that would be their biggest worry. I guess it's one of those trade-offs. There is something to be said for a clear conscience and a couple of dogs like you say. Most types of big success stories do have some trade-offs like that though!

    Thanks for chiming in, donbcms! Unless they're the rare CEOs that are modestly paid, I don't really understand this particular perk.

  • Report this Comment On April 17, 2010, at 7:01 PM, mountain8 wrote:

    Most of the security is to protect them from shareholders.

  • Report this Comment On April 18, 2010, at 11:25 AM, Atrossity wrote:

    Taxation without representation? Isn't that what jump-started the Revolutionary War? Wonder if the Tea Party is planning on seeing if A&F $90 jeans float in the Charles. One would think Shareholders might care, eh?

  • Report this Comment On April 21, 2010, at 10:51 AM, TMFTurtle wrote:

    Okay, let me play devil's advocate for a minute -- it's their jobs that make them targets. If they left those positions and left public life entirely, they probably wouldn't be targets any more than the next rich dude.

    Given that connection to their jobs, I do think security is a reasonable expense for the company to pick up.

    Golden toilets, not so much. :-)

  • Report this Comment On April 21, 2010, at 4:33 PM, iPixel wrote:

    Let them pay for their own security and the like. Otherwise you might as well start paying for security on any employee that's holds a huge impact on the company wether it's the CFO, or some little guy whose work while unappreciated seriously affects how the company makes money.

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