Gretchen Morgenson - A great reporter for NYT . . . . . . .
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Only the Little People Pay for Lawn Care
Published: May 1, 2005
CHIEF executives are different from you and me. Besides making buckets more money, some of them don't even have to pay their bills.
We learned this again last week when the Securities and Exchange Commission sued Tyson Foods, the big meat producer in Arkansas, and its former chairman, Donald J. Tyson. The company, it seems, didn't fully disclose $3 million in perquisites for Mr. Tyson. The company and Mr. Tyson settled with the commission, neither admitting nor denying wrongdoing.
While $3 million is certainly chump change in execu-land these days, the details of the matter are an amusing reminder of our wacky world - one in which executives pocket obscene amounts in salary, bonus and long-term pay from their shareholders and then turn around and bill them for theater tickets, clothing, antiques, Oriental rugs, vacations and lawn care.
According to the S.E.C., from 1997 to 2001, Mr. Tyson received a total of $3 million in perquisites - a bill shareholders didn't know they were paying. The perks included $38,000 in Oriental rugs and antiques, a $15,000 London vacation, an $8,000 horse and "substantial purchases of clothing, jewelry, artwork, vacations and theater tickets," the S.E.C. said.
At least Mr. Tyson didn't take this all for himself. Regulators said his wife, their three daughters and three people with whom Mr. Tyson had "close personal relationships" were also along for the ride.
Tyson shareholders also paid $464,132 for the personal use by Mr. Tyson, his family and pals of company-owned homes in England and Cabo San Lucas, Mexico. Shareholders paid $426,086 for these people to use company-owned aircraft, even on trips when Mr. Tyson was not on board. Also covered was $203,675 in housekeeping provided at five homes and $84,000 in lawn maintenance at the properties. More than $36,000 was spent on phone bills.
Wait, there's more: the company even paid $1.1 million to cover Mr. Tyson's income tax bills generated by his receipt of these perks.
This, by the way, is a man who made a total of $3.1 million in salary and $1.4 million in bonuses from 1997 to 2001, when he retired. (He stayed on as a director.) In 2001, Mr. Tyson held 103 million shares of Tyson Class B stock, which has supervoting rights.
It's not as if he couldn't afford to pay his phone bill.
Mr. Tyson's lawyer, Barry W. Levine, at Dickstein Shapiro Morin & Oshinsky in Washington, said that the case was about "internal controls" and that the perks paid by Tyson Foods paled in comparison with Mr. Tyson's contributions to the company.
Still, making shareholders pay everyday living expenses is beyond cheesy.
"Since when was it problematic for people to spend their own money on personal expenses?" asked Brian Foley, an executive compensation expert in White Plains.
Since we entered the age of executive entitlement, that's when.
INDEED, the Tyson matter is reminiscent of the awkwardness a few years back when shareholders of General Electric learned that they were paying for Jack Welch's flowers, Knicks tickets, laundry, wine and other executive accouterments, even after he retired.
Last year, the S.E.C. sued G.E. over these undisclosed perks; the company settled the case without admitting or denying wrongdoing. G.E. did not have to pay a penalty in the matter but agreed to disclose all such executive perks in the future.
This time around, the S.E.C. got tougher and made Mr. Tyson cough up $700,000 in penalties. But is it not paradoxical that Tyson shareholders, who paid the bill for all those perks, also had to pay $1.5 million to the S.E.C. as punishment for their company's failure to disclose them?
The only good news in all this is that finally, the S.E.C. is sending a message to companies that they had better make full disclosures of the dazzling array of benefits paid to top executives.
Most of this bounty has been kept under wraps. But mindful of these two cases, boards and executives will have to think seriously about forgetting to tell shareholders what they are paying to keep the hired help happy. Armed with a complete list of shareholder-paid salaries, bonuses, retirement plans and perks, investors will be better able to decide if their interests are being served.
While pay practices at United States corporations are entrenched and difficult to change, Mr. Foley said, the G.E. and Tyson cases may make directors and executives reconsider forcing shareholders to pay for everyday expenses.
Or, if they want to insist on billing the shareholders for car maintenance or the occasional horse, they will at least have the decency to tell the shareholders where their money is going.
"These cases will make people more gun-shy," he said. "The chances of getting called out on this and somebody making a fuss about it have gone up substantially. The S.E.C. is raising the ante and hopefully that will encourage people to be more thoughtful in terms of what they ask for, what they accept and how they disclose it."
It can only be hoped.
Weyerhaeuser Wakes Up Last week this column spanked Weyerhaeuser, the big forest products company in Federal Way, Wash., for ending the practice of taking shareholders' questions from the floor of its annual meeting and instead requiring owners to put questions in writing. Shareholders were frustrated and angry over the weirdly dictatorial move.
Last week, Steven R. Rogel, the company's chief executive, said that he regretted the decision and that future meetings would again include questions from the floor. "To listen to our shareholders, we were reminded that there is no substitute for hearing from them directly, in their own words," Mr. Rogel said in a statement.
Good move.
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