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Jerks and Their Perks

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What do you call somebody who accepts rewards he or she doesn't really deserve? Someone who balks, scoffs, or acts clueless when you demand rational examples of good performance over time? Someone who wants a bailout when things go wrong, but still keeps pushing for more goodies, even after screwing up?

The word "jerk" comes to mind. Then again, so does "typical CEO of a major company."

So what do you pay for?
A recent Washington Post article pointed out that last year, Wall Street CEOs continued to receive lavish perks, even at businesses that took government money. These cushy extras included "country club dues, chauffeured drivers, personal finance planning services, home security services, and parking."

The article pointed out that JPMorgan Chase's (NYSE: JPM  ) Jamie Dimon enjoyed a 19% increase in perks in 2009, up to $266,000 -- including $91,000 in personal travel on the company plane.

Apparently, a lot of CEOs have been feeling pretty insecure lately. Dimon, Goldman Sachs' (NYSE: GS  ) Lloyd Blankfein, and Capital One Financial's (NYSE: COF  ) Richard Fairbank all received higher (and pricier) levels of personal and home security in 2009.

Compensation consultant Equilar studied 29 large recipients of federal aid, discovering that 1 in 3 of them boosted such extra goodies for their CEOs.

Soaring perks for some
Alas, Wall Street's little different from most of the rest of corporate America, where countless corporations' boards of directors express no qualms about handing out such largesse at shareholder expense.

In a recent look at top execs' "security" perk, I noted that while some companies have ratcheted back such expenses, other CEOs enjoyed an increase in that benefit last year. That's ironic, since many Americans felt much more financially insecure in the same period of time.

The price tag for Starbucks' (Nasdaq: SBUX  ) CEO Howard Schultz's protection increased 25% to $640,000 in 2009, while (Nasdaq: AMZN  ) spent an eye-popping $1.7 million on varying security measures for Jeff Bezos.

Beyond the Wall Street types, though, the prize for "Most Outrageous" probably goes to Abercrombie & Fitch (NYSE: ANF  ) , which recently decided to pay CEO Mike Jeffries (already very highly compensated) $4 million in exchange for limiting his use of the corporate jet.

That's antisocial, all right
This behavior is most disturbing in the Wall Street set. Many of those companies directly played into the financial crisis, and plenty would have failed without government assistance. Asking for more goodies in the wake of such utter failure seems downright sociopathic.

I'm pretty sure there was a time when powerful individuals might worry about what society thought of them if they appeared to greedily take advantage of a situation. These days, that concept doesn't seem to cross many minds. I guess all those chauffeured rides, secured mansions, and country club jaunts leave the top brass living in a self-satisfied bubble. I just can't agree that shareholders should foot the bill for their lavish lifestyles.

Prime time for a pushback
At the end of 2008, I hoped that many folks would think about what had transpired in the years leading up to the financial crisis. While some degree of self-interest can be positive and drive folks to achievement, unbridled and ruthlessly selfish greed can have deadly consequences. Alas, the subsequent lack of any sort of real change in the business worlds suggests that Americans have short attention spans.

However, there are increasing signs that some shareholders are seizing their chance to encourage greater responsibility from managements and their boards. Occidental Petroleum and Motorola (NYSE: MOT  ) shareholders both recently pushed back on pay, for example.

Furthermore, I was recently gratified to hear that AFSCME (an institutional shareholder activist linked to the AFL-CIO) has started a "Vote No" campaign for Abercrombie & Fitch's June 9 annual meeting. The group plans to vote against directors who have served on Abercrombie's compensation committee. It's also pushing for an independent chairman, and urging other Abercrombie shareholders to do the same.

Hopefully, more shareholders will join the chorus raising its voice against management excesses and director complicity. If management teams and boards continue to push the limits of what seems rational and reasonable, it's high time the rest of us push right back.

Check back at every Wednesday and Friday for Alyce Lomax's columns on corporate governance. and Starbucks are Motley Fool Stock Advisor selections. 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 (10) | Recommend This Article (15)

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 May 29, 2010, at 3:37 AM, olwreckdiver wrote:

    When the HECK are the stockholders going to figure out that THEY CAN cut these jerks compensation?

    In the U.S. Navy, if a ship runs aground the captain gets the blame.

    Or are the big institutional investors just in on the game?

    These greedy bastards are destroying our economy AND giving Capitalism a bad name.

  • Report this Comment On May 29, 2010, at 1:04 PM, XMFConnor wrote:

    I certainly would not complain about Howard Schultz and Jeff Bezos. As a shareholder, I'd say they deserve every bit of their security measures and private travel. Those guys are worth every dime.

    For other CEO's, even underperforming ones, is it really in the company's best interest to have them flying coach, or to not have serious security measures in place? I am sure that there are examples of over the top perks, but I wouldn't point to Bezos and Schultz as evidence. Those guys are worth every single dime and much more, so in my mind, shareholders should complain at their own peril. It's easy to complain about these nice perks when times are tough, but I am not sure that an overarching complaint against CEO compensation is appropriate, which is why I respectfully and foolishly disagree with the point of this article.

  • Report this Comment On May 29, 2010, at 1:07 PM, XMFConnor wrote:

    One more follow-up:

    For example, the first comment here by olwreckdiver: "Those greedy bastards are destroying our economy AND giving Capitalism a bad name."

    I couldn't disagree more. Bezos and Schultz pretty much represent what capitalism is all about. They worked their butts off, created incredibly successful organizations which employ thousands of people, and have been the driving force behind excellent shareholder returns. Now, you will complain about their security measures and travel perks? Seems petty to me. The "populist" anger is easy to incite when times are tough, but is it actually a valid point? If you really think so, drive Bezos and Schultz out--- see what happens.

  • Report this Comment On May 29, 2010, at 7:06 PM, catoismymotor wrote:

    You've got moxie, kid.

  • Report this Comment On May 29, 2010, at 9:02 PM, wolfman225 wrote:

    "What do you call somebody who accepts rewards he or she doesn't really deserve? Someone who balks, scoffs, or acts clueless when you demand rational examples of good performance over time? Someone who wants a bailout when things go wrong, but still keeps pushing for more goodies, even after screwing up?"

    Uh, I dunno.....CONGRESS?

  • Report this Comment On May 30, 2010, at 4:56 PM, TMFLomax wrote:

    Thanks for the thoughts, everyone.

    XMFConnor, I agree that Bezos and Schultz are very good leaders who have built amazing companies. However, in general, I think a lot of the extra perks that are given to top executives across the board at shareholder expense are fairly outrageous given the fact that most CEOs are very highly compensated to begin with. I think some of this behavior in corporations has become a status quo thing -- "everybody does it" -- that shareholders really should question. I agree with pay that lines up with performance, including lucrative pay for excellent performance... however, the extra perks thrown in seem strange and I wonder at the fact more CEOs don't voluntarily say they want to be responsible for some of these things at their own expense.

    The perks I cited above are more shocking of course with financial companies bailed out by taxpayers, but I wanted to make the point that maybe shareholders should question some of these policies/corporate behavior that have become so commonplace, simply across the board and on principle (and yes there's populist outrage pointed at the bankers with good reason after what transpired, but on a bigger-picture level some of this is the "expectation" in corporations today, so should we just focus on those who have become unpopular with so many people these days... I don't think so). I suppose there are arguments to be made for covering security at shareholder expense, but things like country club memberships and so forth... a lot of perks sound like in any rational world, they'd be considered personal expenses.



  • Report this Comment On May 31, 2010, at 12:35 PM, Atrossity wrote:

    Here here Alyce!

    What is going on? Business ethics is an oxymoron as is corporate responsibility. What world to these folks live in where they aren't ashamed at being effectively rewarded for failure? Where is the moral outrage by those whose money is being siphoned away? 17th Century European royalty appear less immune to accountability then the current cult of the CEO.

    These folks are glorified managers, they are not physical manifestation of the companies they run, nor demigods. I suppose people feel the need to anthropomorphizing companies into their CEO's and as a result the CEO's can fleece the poor dumb bastards who want to believe all they need to know about a company is how charismatic a dictator its CEO would make. I'd better stop, I'm starting to get incensed.

    Thank you for your insight and voice of reason in the land of the blind.

  • Report this Comment On June 01, 2010, at 1:42 PM, kwl1763 wrote:

    Alyce, I agree with your comment above. Specifically " I think a lot of the extra perks that are given to top executives across the board at shareholder expense are fairly outrageous given the fact that most CEOs are very highly compensated to begin with"

    These guys make millions, beyond security which I think is a companies duty to provide, and I agree you want them in a business jet on company business but it should not be for personal use, period. You can pay from your millions for personal travel, country club dues, fancy chefs, etc etc. All this should be out of their own pockets.

    I'm a huge believer in compensating for a good job but perks are jsutthe sort of thing that is small to then but outrages everyone else! Why do it? The answer is easy, everyone else does, and we always have.

  • Report this Comment On June 01, 2010, at 4:53 PM, CMFStan8331 wrote:

    I think shareholders tend to not care about excessive perks when the stock is doing well, similar to the way few people cared about getting a good deal on a house purchase when prices were constantly rising. There's probably not much that can be done about that phenomenon, but the real problem I see is that even when shareholders do start to care, there's often nothing they can do about it due to rigged corporate structures that often prevent shareholders from having a practical path to express their will. I would like to see a common, hopefully voluntary and mutually agreed-upon set of rules for all companies, making it possible for shareholders to veto what they view as excessive compensation packages.

    But I'm not holding my breath.

  • Report this Comment On July 22, 2010, at 6:08 PM, KKnese wrote:

    I hate to be the one to tell y'all this, but the execs will soon come crashing down! GM has already gotten a taste of what it's like when your company can't compete in world markets, and other companies will too. First they outsource the workers, then they outsource the engineers. The engineers in the foreign country get some buddies together to finance their startup and take minimal salaries for themselves. They can offer the same product for less money because nobody's getting paid much, not even the CEO! Bye-bye American company! The Yankee executive can't find another company dumb enough to hire him for the salary he wants and the Pension Benefit Guaranty Corporation took away his cushy retirement plan. Whatsoever goeth around cometh around!

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