Perks: Jerks vs. Good Works

Although the term "perquisite" (or "perks") can signify a valuable benefit any employee receives above and beyond his or her base salary, it's most often associated with this definition from Dictionary.com: "something demanded or due as a particular privilege."

In other words, it most often brings to mind luxurious bennies for top executives, like free use of company cars, corporate jets, and country club memberships.

Maybe it's time for a major revamp. It's time for the marketplace to rethink what perks are, who receives them, and what would generate the most value; let's think about a more stakeholder-friendly approach.

Unprincipled perks
You don't have to look far to find some of the "privilege" perks CEOs tend to receive, and many of them are outrageous.

Here are just a few examples; they are plentiful in our marketplace, and these aren't even the most egregious.

  • Sears Holdings isn't exactly blowing anybody's mind with its business performance, but CEO Louis D'Ambrosio's travels between the company's headquarters in Chicago and his Philadelphia home cost the company nearly $800,000 last year.
  • Most Americans have to deal with their own tax and accounting issues, but Chesapeake Energy's (NYSE: CHK  ) Aubrey McClendon got $250,000 in "personal accounting support" in 2011. That's especially galling considering how he got himself into so much hot water at the company.
  • Last year, Las Vegas Sands (NYSE: LVS  ) footed the personal security expense for its chairman, Sheldon Adelson; that bill came to $2.6 million.

The very, very weird thing about many of these perks: We already know these individuals make the big bucks anyway. Most rake in gigantic paychecks. Last year, average CEO pay at S&P 500 firms rose 14% to $12.9 million, by the AFL-CIO's estimate.

Certainly part of the rationalization for the huge paychecks is that these individuals might need a few things that regular Americans don't. Hey, apparently some of them need security details and don't really want to live anywhere near the same city as their company's headquarters. You'd think such "incidentals" would hardly be the company's business to cover once the gigantic pay is doled out, but apparently not.

Meanwhile, do you think these kinds of high-priced perks for CEOs really have a stunningly impressive return on investment? I don't buy it. Such perks are about entitlement and "privilege" far more than truly incentivizing better job performance.

And maybe some CEOs would do a better job if they were responsible for more of the things regular folks do. They might tap into their capacity for empathy, for example.

Principle-infused perks
Maybe investors, corporate managements, and boards need to rethink what a truly great and productive perk is. Maybe the best perks are the ones that make regular employees' work lives better, more rounded, or more meaningful, helping truly inspire them to innovate and do their jobs exceptionally well.

Fast Company's Ariel Schwartz recently outlined "The Ultimate Employee Do-Gooder Perk." Although Microsoft (Nasdaq: MSFT  ) and Intel (Nasdaq: INTC  ) are among employers that make their employees' lives better by offering paid sabbaticals for rebooting purposes, software company SAP (NYSE: SAP  ) is taking a different approach to company-sanctioned time away from the daily grind.

Although SAP offers unpaid sabbaticals of the regular sort, it's testing out paying some employees to embark on social sabbaticals to work with nongovernmental organizations in emerging markets. The intention is to help "high-potential" workers "develop leadership skills, connect with leaders in emerging markets, teach SAP about the needs of NGOs in these markets, generate strategic social investments for the company -- and of course, support the development of the NGOs."

According to SAP, its program is "an innovative learning opportunity for SAP employees to contribute their time and talent to helping entrepreneurs and small businesses in emerging markets," and a leadership development initiative.

Of course, it not only exposes employees to new places and people, but it gives them the opportunity to try to solve problems while hopefully helping to make the world a better place.

Somehow ideas like this one sound more meaningful -- and better for corporate talent pools -- than millions' worth of rides on corporate jets for a handful of privileged people.

Going for the win-win-win in stakeholder capitalism
SAP's plan may sound too touchy-feely, but that's an old-fashioned takeaway. Not only are such programs likely to help employee engagement -- a factor in employee happiness -- but they will also help create new leaders and better problem-solvers, stronger companies and higher profits, all while generating a social dividend too.

This is the spirit that can boost economies, foster innovation and entrepreneurship, and solve problems. Call it a win-win-win.

In other words, more organizations should ponder perks that can boost the most stakeholders. It's easy to see how programs like the one SAP has embarked upon actually stretch each dollar well, investing money where it can have the most positive impact in the most areas.

On the other hand, do the millions upon millions of dollars' worth of country club memberships, rides on corporate jets, and chauffeured rides bestowed on CEOs wring the same value from the money spent? It seems like a reasonable question to ask.

Adding many stakeholders into the equation is an excellent way to think about modern business perks, and help shareholders profits, too. Maybe more perks should come from principles, not as a result of privilege.

Check back at Fool.com for more of Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Chesapeake Energy, Intel, and Microsoft. Motley Fool newsletter services have recommended buying shares of Intel and Microsoft, as well as creating a synthetic covered call position in Microsoft. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


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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 September 05, 2012, at 1:57 PM, mdk0611 wrote:

    "Free" use of company cars, corporate jets and country club memberships?

    I think IRS and the executive's W-2s could confirm that these are really not free.

    You have plenty of solid material to work with on this issue. No need for the hyperbole.

  • Report this Comment On September 05, 2012, at 6:17 PM, ershler wrote:

    mdk0611,

    First, many of these perks are free as long as they are not classified as personal use.

    Second, they are only paying SIRL rates for private jets which are significantly lower then actual rates.

  • Report this Comment On September 05, 2012, at 6:49 PM, dennyinusa wrote:

    We as stockholders own the company and can pay whatever we want. If CEO does not agree he is free to leave. This is exactly why CEOs and Board of Directors are so opposed to let stockholders/ (real owners of company) have say in compensation packages.

    Come on stockholders you are the real owners of these corporations these people are stealing your money. Does the owner where you work have no say on employee pay package?

    I think people have forgotten a CEO is an employee, not owner of company.

    The first step should be no current CEOS should be able to sit on a board of directors; directors should only be on one board; nor should they have any other full time job; sitting on a board should be a full time job. To many boards are just made up of cronies and the old boys club members who do little research and have little incentive to do more than act as rubberstamp to CEO’s whims.

  • Report this Comment On September 06, 2012, at 9:37 AM, mdk0611 wrote:

    I can see an argument that a CEO should never be the Chairman of the Board, but the CEO should be a board member.

    If you limit board members to a single board with no other full time employment you'll end up with nobody competetant wanting to serve on boards. The compensation for board members almost never equals even middle management compensation and is suject to the self-employment rate of FICA tax. Add to that they would have to pay for their own health insurance and retirement plan.

    BTW - Would a union officer who sits on a board be required to resing his/her position with the union?

    Ershler - You think IRS doesn't take an interest in classifying perks as "personal use"? I don't think the abuse is nearly as significant as you imply. And if it's not personal use then it is a legit corporate expense.

  • Report this Comment On September 06, 2012, at 9:38 AM, mdk0611 wrote:

    Five thumbs. Make that "resign" his/her position with the union.

  • Report this Comment On September 06, 2012, at 2:19 PM, ershler wrote:

    mdk0611,

    The IRS should take an in interest in how perks are classified, if they didn't they wouldn't be doing their job. If you have experience with the IRS declaring legitimate documented expenses as personal please share, I haven't.

    I've reread my post and I don't think I implied any level of people claiming business use when it was actually personal use. I agree with you (for publicly traded companies) it isn't that common. I was referring to the fact that getting to fly on a private jet for work is a huge perk the individual doesn't have to pay for.

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