Dirt Diggers Digest

I was intrigued by a post that just appeared in Footnoted.org about some companies whose recent proxy statements disclose they are reimbursing top officers for the cost of having their cars washed. We have all heard about the expensive perks large corporations shower on their executives: country club memberships, use of corporate jets, personal financial advisors, etc.—all in addition to munificent salaries and bonuses. Yet are companies also taking care of mundane everyday expenses as well?

In theory, it shouldn’t be possible to learn these details, since even under the more rigorous disclosure rules imposed by the SEC in 2006, companies are not required to list perks worth less than $10,000. Nonetheless, I decided to follow Footnoted’s lead and search the database of recent proxy statement to look for other kinds of personal services being provided to executives. Here’s an assortment of what I found.

SLM Corp.—the student loan company also known as Sallie Mae—reports that it not only provided a townhouse for president C.E. Andrews but also paid for “real estate taxes, homeowner’s insurance, neighborhood association fees, repairs and improvements, utilities, lawn and housekeeping services, and pest control.”

Harris & Harris Group—a business development company focusing on nanotechnology—pays for both a health-club membership and a personal trainer for chief executive Charles E. Harris.

BioLase Technology—a producer of dental lasers—paid the laundry expenses of Keith Bateman while he was executive vice president of the company.

Military contractor Raytheon and numerous other companies pay for security systems at the homes of their top executives.

Home Depot pays for the home internet services used by their top executives and picks up the tab when they send funeral flowers.

Beermaker Anheuser-Busch has a company barber shop for top executives and provides free beer “for personal use and entertaining.”

The costs of these perks are trivial in comparison to the cash compensation the executives receive and are barely a blip in the overall finances of the companies. But they illustrate the regal manner in which the corporate elite are treated. How can a CEO who doesn’t have to pay many of his or her own personal expenses—including in some cases the cost of six pack—understand the situation of those who get nothing for free?

Through war and peace, recession and expansion, bear market and bull—there is one constant in the American economy: Large corporations will pay their top executives ridiculous amounts of money. As the country focuses more on a weakening economy, some members of Congress are raising questions about the eternal boom in CEO compensation.

Today, the House Committee on Oversight and Government Reform, chaired by Rep. Henry Waxman of California, issued a preliminary report on the research its staff has done in preparation for a hearing tomorrow on the compensation and retirement packages awarded in recent years to the chief executives of three companies implicated in the mortgage crisis: Angelo Mozilo of Countrywide Financial Corporation, E. Stanley O’Neal of Merrill Lynch, and Charles Prince of Citigroup. (O’Neal and Prince no longer hold those jobs.)

In addition to looking at SEC filings, the committee obtained thousands of pages of documents directly from the companies, including board minutes and internal e-mails—some of which the committee has put online.

The report raises a series of pointed questions, no doubt foreshadowing tomorrow’s interrogatories, particularly about Mozilo’s personal stock sales last year, the exceptionally generous “change in control” provision in his employment contract, and the lucrative way in which his cash bonuses have been calculated. Mozilo is estimated to have received a total of about $250 million in pay over the past decade. Uncomfortable questions also appear to be in store for O’Neal and Prince about discrepancies between their personal compensation and the fortunes of their firms amid the mortgage meltdown.

Meanwhile, the Oversight Committee’s Subcommittee on Government Management, Organization and Procurement is considering a slate of contracting reforms, one of which would require all companies—whether publicly traded or privately held—that receive more than 80 percent of their revenue from doing business with Uncle Sam (and get at least $5 million in annual revenue from such contracts) to submit data on their top executives’ compensation for inclusion in a public database. The disclosure bill, H.R. 3928, was introduced by Rep. Christopher Murphy (D-Conn.) in response to the controversy surrounding contracts held by the mercenary supplier Blackwater.

Although the bill would cover only a limited number of larger companies that are heavily dependent on government business, industry representatives testifying at a hearing last week strongly opposed the measure. Their dubious argument, echoed by a Bush Administration official, was that the disclosure would have a “chilling effect” on the willingness of companies to compete for contracts. The idea that companies receiving more than three-quarters of their revenue from the federal government would walk away from that market is laughable.

For a good assessment of the disclosure bill and the other contractor reform measures being considered by the subcommittee, see the prepared testimony submitted by Scott Amey, General Counsel of the Project On Government Oversight.