Most outrageous ceo perks of 2006 so far

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Most outrageous CEO perks of 2006 -- so far

Boards keep showering execs with juicy perks and severance packages while shareholders foot the bill. This time, it's Nike, eBay, Fedders and Starwood Hotels passing out treats.

By Michael Brush

After years of public outrage over gold-plated perks for top execs -- from $6,000 shower curtains to private jets and expensive race-car driving lessons for the kids -- you might think that companies have wised up and cut back on the giveaways.

You'd be wrong.

The perk-fest lives on. So far this year, execs have gotten a bevy of sweet deals that would make former Tyco International (TYC, news, msgs) CEO Dennis Kozlowski proud. Here are a few examples of some of the lavish goodies that companies have showered on execs:

  • An outgoing chief executive at Nike (NKE, news, msgs) got $579,649 for home remodeling.

  • The new finance chief at eBay (EBAY, news, msgs) will get up to $700,000 if he can't get the price he wants for the Texas house he gave up to take his job with eBay in California.

  • A new president at Starwood Hotels & Resorts Worldwide (HOT, news, msgs) will get $1.5 million for airfare during his first year on the job. The money is meant to help him commute to work in New York so he can keep his home in California while his son finishes high school there.

"After all we've been through, you would think boards would be extra diligent about awarding perks that basically waste money with little to show in return," says Daniel Pedrotty, an attorney at the AFL-CIO Office of Investment, which tries to pressure companies to be more responsible with money. "It strikes me as unusual that boards don't have more discipline with company money in light of all the attention this issue has gotten."

"What we have is a major crisis in America with ineffective directors," agrees Don Hodges, president of the Hodges Fund (HDPMX, news, msgs). "When they become directors, they join the country club, so to speak. They forget they are working for shareholders. Probably 85% of them feel like they work for the CEO, so they lay down on the job and give away large chunks of the company."

The companies say that top talent is worth the price, and that competition for that talent creates and legitimizes the need for generous pay packages. But from a shareholder's point of view, it's hard to see how these kinds of sweet deals for execs help. Pay experts believe executive compensation works best when it's linked to performance -- and these execs get their perks no matter how good a job they do.

One solution, says Chuck Collins at United for a Fair Economy, would be to give shareholders greater say in pay packages. "Until compensation packages get approved by shareholders, and not boards that are hand-picked by management, we are going to keep seeing this kind of stuff."

Top prizes

Here's a closer look at some of the juicier perks executives have gotten so far this year, thanks to Michelle Leder at

  • When former Nike Chief Executive William Perez resigned last January after a little over a year on the job, he got a very sweet golden parachute. Nike gave Perez a severance package worth $5.5 million, including $2.8 million that represents two years' base salary and a $1.75 million bonus for 2006 even though he didn't serve for most of the year. Nike accelerated the vesting of restricted stock -- allowing Perez to take another $11 million.

Nike also purchased his Portland, Ore., home for the price he paid, or $3.18 million. But here's the kicker: The company picked up the tab on $579,649 worth of renovations Perez made at the home. Nike also offered $56,500 to cover prepaid athletic club fees if he quits the gym.

"If you are making that kind of money, do you really need to have someone pay your athletic club fees?" asks Leder.

All of Perez's severance benefits were built in to his initial employment agreement, responds Alan Marks, the director of media relations at Nike. "In approving Mr. Perez's original employment agreement in November 2004, the board thoroughly reviewed, discussed, and approved these matters and determined at that time that the employee agreement was reasonable."

  • At a time when many home sellers have to cut their asking prices to make a deal, eBay has made sure its finance chief Bob Swan is spared this tribulation.

Swan accepted his job at eBay last February, for a $600,000 base salary and a $1 million retention bonus paid annually in five parts. But in early July, eBay threw in a sweetener that shields Swan from softness in the real-estate market in his old hometown of Plano, Texas. The terms of the deal: If Swan has to sell his house for less than the $3 million he paid for it, eBay makes up the difference, up to $700,000.

"This is asking shareholders to protect this guy from market forces, which I think is absurd," says Robert McCormick, vice president of research at Glass Lewis & Co., a consulting firm that advises institutional investors how to vote on proxies.

"Like many companies," responds eBay director of corporate communications Hani Durzy, "eBay offers competitive relocation packages to executives to ease the personal and financial burden associated with moving a home and family."

  • At a time when the price of a plane ticket keeps going up, the new president of the hotel group at Starwood Hotels, Matt Ouimet, doesn't have to worry about the trend.

The hotel chain has given Ouimet $1.5 million in airfare for his first year on the job. Ouimet was hired away from Walt Disney (DIS, news, msgs) earlier this summer by Starwood, which manages Sheraton Hotels & Resorts and W Hotels, among others.

Starwood Hotels says it gave Ouimet the airfare to help him commute from his home in California to offices in White Plains, N.Y., and to Starwood hotels around the world while his son finishes high school.

Given his pay package, you might think Ouimet could pick up the tab -- at least for the commute to White Plains. He'll get $4 million in his first year, including salary, signing bonus, restricted stock and options. In his second year, he will make at least $3.2 million. Starwood Hotels will also pay the taxes on the airfare perk, which will probably cost shareholders another $500,000.

"That's outrageous," says Pedrotty. "First class isn't the worst way to travel, and I am sure it would cost less than $1.5 million." In fact, round-trip, first-class airfare from Los Angeles to White Plains is $1,554 on United Airlines. So a year's worth of weekly trips to New York -- assuming he takes two weeks of vacation -- would set Ouimet back $78,000, or 2% of his first year's pay.

Starwood Hotels spokeswoman K.C. Kavanagh says the airfare subsidy "will allow him to personally visit many more of our properties during his first year than would be physically possible with commercial air travel." The subsidy will also allow him to "spend weekends with his family during his son's final year of high school. This is a cost of doing business to recruit a unique talent," says Kavanagh.

Rising rates? Not for some

  • Loans are getting more expensive for most people, but Fedders (FJC, news, msgs) Executive Chairman Sal Giordano doesn't have to worry about interest rates. The chairman has a $6 million interest-free loan from Fedders that he won't have to pay off as long as he works for the company.

Under the terms of a recently inked employment contract for his position as chairman, after his first year on the job his annual contract simply rolls over every day. So his obligation to pay back the loan just keeps getting pushed back, as well. "That's a perk that just keeps giving," says Collins.

Giordano was recently promoted to executive chairman so his son Michael Giordano can take over his position as CEO in October. It's hard to make the case that the loans have helped shareholders. Since early 2004, Fedders stock has slipped to $1.25 from $8. The company declined to comment on the loan arrangement.

  • For at least three years, Atari (ATAR, news, msgs) has covered the rent at a Manhattan apartment for Chief Executive Bruno Bonnell. This year, the rent subsidy was upped to $12,200 a month. The rent subsidy doesn't seem to have helped shareholders. They have been on a ride nearly as scary as Atari's new video-game release: RollerCoaster Tycoon 3. Since early 2005, Atari stock has fallen to 65 cents a share from above $3. Atari declined comment.

Paid well for quitting

  • Executives at two companies this year nabbed multimillion-dollar severance packages for quitting -- even though each worked for about a year.

Gary Bloom signed an employment agreement with the security software company Symantec (SYMC, news, msgs) in December 2004 as Symantec announced the purchase of a company he headed called Veritas. Bloom officially joined in July 2005 when Symantec finalized the purchase. He promptly quit last March.

His brief stay at Symantec allowed him to qualify for a $1.6 million signing bonus, and he also got $3.5 million in severance pay. His total take for 15 months on the job: $5.1 million.

James Daley joined Commercial Capital Bancorp (CCBI, news, msgs) as a vice president in charge of commercial banking last July. Earlier this summer, Daley lost his job because his bank is being bought by Washington Mutual (WM, news, msgs). On his way out the door -- after about a year at Commercial Capital -- Daley collected severance pay, retirement and insurance benefits worth over $5.5 million.

"This is why we have been pushing for shareholder approval of golden parachutes if they are worth more than three times base salary," says Pedrotty. "Shareholder money is being given away."

Both Symantec and Commercial Capital declined comment.

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