Despite my best intentions, I can't seem to help myself come Thanksgiving. Not only do I eat heaping portions of turkey, mashed potatoes, and string-bean casserole, but there's the cranberry sauce, turnips, stuffing, dates with peanut butter, and, of course, beer. As the tryptophan kicks in, I feel like a bloated mess.
I imagine that's how some company executives feel after gorging themselves at the table of shareholder value. Not only do they fill themselves up with generous pay packages, they also stuff their gullets with stock options, company cars, corporate jets, country club memberships, security details, and even game consoles.
Chrysler boss Bob Nardelli rankled a lot of people with the overly generous, titanium-plated golden parachute given him when he jumped from Home Depot
As much as these shareholder giveaways suck oxygen from the room when we read about them, they're at least partially mitigated if the company's stock has risen during the emperor's reign. Shareholders are able to partially benefit. Unfortunately, that's not always the case.
Adding insult to injury
Moreover, like the pumpkin and Boston cream pies brought in after the feast, some companies go one step further and pay the taxes due on these benefits -- with payments known as "gross-ups." They're not unusual. According to the Corporate Library, some 20% of CEOs -- more than 650 executives -- have their companies pick up the taxes. The organization calls it the Leona Helmsley provision: "Only the little people pay taxes."
Proxy firm RiskMetrics is taking the matter one step further. It will advise investors to withhold votes from corporate directors who approve such perks for executives. Citing Capital One Financial
Some of the notable firms involved in the recent financial storm on Wall Street have apparently not granted gross-ups to their executives -- Citigroup
Sometimes the amounts spent on these additional perks aren't particularly meaningful. For example, Allergan's
RiskMetrics feels the willingness of boards to hand out gross-up payments is symptomatic of a "no-holds-barred" atmosphere permeating executive suites. Right. It's just one more way that executives resemble pigs feeding at the trough.
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