Protection is a pricey perk for top tech CEOs
- 26 June, 2013 19:58
Some tech boardrooms go to expensive lengths to protect the top brass, authorizing company funds for cars, drivers, bodyguards, and home security systems to keep the CEO safe.
The cost is high, but proponents view safeguarding the CEO as a necessary business expense. The CEO is among a company's most valuable assets, and protecting that asset can minimize corporate risk and align with shareholder interests.
Network World analyzed pay packages at 49 tech companies and found seven that itemized security-related perks received by the CEO. One of the most expensive programs is at Oracle, which paid US$1.5 million to secure CEO Larry Ellison's primary residence.
"We require these security measures for Oracle's benefit because of Mr. Ellison's importance to Oracle, and we believe these security costs and expenses are appropriate and necessary," Oracle wrote in its proxy statement. Ellison paid for the procurement and installation of the security equipment, and he's responsible for maintaining the system. Oracle pays for the annual costs of security personnel.
At a time when executive perks in general are on the decline, CEO security is one that has staying power.
"We're definitely seeing a removal of perks, particularly the perks that would be considered shareholder irritants, like excise tax gross-ups," says Joe Sorrentino, managing director at Steven Hall & Partners, an executive compensation consulting firm in New York. "One perk that still has some staying power is corporate aircraft usage," Sorrentino says.
Companies often justify letting the CEO use corporate aircraft for personal travel because of security concerns -- the same reason they fund personal and residential security programs.
The security perk "is still pretty common for the very large, high-profile companies -- defense companies, major consumer goods companies ... financial services firms," Sorrentino says. "We're not seeing any increases in [security-related] perks. However for the big-name companies, it's not surprising to see it. I don't think it's a majority, but it's a healthy minority."
Salesforce.com worked with a security consulting firm to design CEO Marc Benioff's security program, which it deems "necessary and appropriate for the protection of our CEO given the history of direct security threats against the senior executives of major U.S. corporations and the likelihood of additional threats against these individuals in the future."
Salesforce.com established its security program in 2012 "in response to bona fide business-related security concerns for our CEO," the company stated. Last year's security costs for Benioff came to $648,456, which included physical and personal security services, including on-site residential security.
"As our founder who has led the Company for more than 13 years, our CEO has overall responsibility for our business strategy, operations, and corporate vision. The Compensation Committee not only believes that ensuring his personal safety is vital to our success as an organization going forward, but that establishing such a program would be a prudent action in light of its overall risk management responsibilities," Salesforce.com asserted.
As part of Marissa Mayer's employment agreement, Yahoo agreed to reimburse her for up to $50,000 of security expenses per year. In 2012, the company paid $39,467 for personal security services for CEO Mayer, who joined the company in July of last year.
NCR paid $55,636 in security-related costs for its CEO, William Nuti. The payments are for "the Company-provided car and driver Mr. Nuti is required to use for security purposes in and around the New York City area, to the extent that such trips were for commuting purposes," NCR explained in its proxy statement.
In the same pricing league is Intel, which paid $58,600 for home security expenses for former CEO Paul Otellini, who retired this spring.
AT&T picked up the tab for CEO Randall Stephenson's home security, which amounted to $101,923 in 2012.
The tab at Amazon.com is much higher: $1.6 million on security for CEO Jeff Bezos. The Internet retailer justifies the security expenses in part because of Bezos' low compensation (besides the $1.6 million security perk, Bezos' only pay is his $81,840 salary).
"We provide security for Mr. Bezos, including security in addition to that provided at business facilities and during business-related travel," Amazon wrote in its proxy statement. "We believe that all Company-incurred security costs are reasonable and necessary and for the Company's benefit, and we believe that the amount of the reported security expenses is especially reasonable in light of Mr. Bezos' low salary and the fact that he has never received any stock-based compensation."
There are likely other tech CEOs who receive security perks in addition to these seven tech leaders, but not all of those perks are itemized in financial reporting documents. For example, Time Warner Cable paid for CEO Glenn Britt's "personal use of a Company-provided car and specially trained driver provided for security reasons," but didn't disclose the cost.
The U.S. Securities and Exchange Commission doesn't require companies to report the exact cost of a perk if the benefits are valued at less than $10,000 -- but it does view CEO security as a perk. While a company might consider the CEO's security to be a corporate expense, the SEC sees it differently because there's a personal benefit associated with company-paid security and because it's not a benefit that's offered to all employees.
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