James F. Reda and Associates Study Analyzes "Stealth Compensation" for CEO's at 'Fortune' Magazine's Top 150 Public Companies

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The average CEO's perquisites and pension benefits are nearly 50% more than the average CEO annual salary.

2007 CEO Perquisite and Supplemental Retirement Study

The annual value of perquisites and retirement-related increases represent nearly 50% the annual Chief Executive Officer's salary according to the "2007 CEO Perquisite and Supplemental Retirement Study," conducted by James F. Reda and Associates, a New York compensation consulting firm. The study analyzed CEO's perquisites and supplemental retirement disclosures at 'Fortune' magazine's top 150 public companies.

The new Securities and Exchange Commission (SEC) disclosure requirements confirmed what many analysts suspected for a long time - that there is considerable compensation hidden from public view, and more importantly, from the shareholders.

The most popular CEO perquisite is the personal use of corporate aircraft with 67% of the 'Fortune' 150 public companies offering this benefit. Some companies limit the number of allowable trips and offer the benefit to the CEO's spouse as well.

Around 50% of the companies provide their CEOs with financial/tax assistance, use of an automobile, tax gross-ups or reimbursements and supplemental health and welfare benefits.
Perquisites, such as home security systems and club memberships, are less prevalent, due to heightened investor scrutiny.

The new disclosure requirements for perquisites circulated by the SEC require revealing the change-in-value for all defined benefit plans and 'above-market' or preferential earnings on deferred compensation amounts. The value of supplemental pension benefits is a significant part of an executive's pay package and represents a large portion of compensation that is not performance-based. At some companies, the annual increase in pension benefits is nearly eight times that of salary. The average annual increase for 'Fortune's' 150 is approximately one times their annual salary.

"Now that we can see more clearly the size and nature of these benefits, it remains to be seen how corporate boards will react," said Jack Moran, Managing Director of James F. Reda and Associates. "We have seen increased discussions regarding the needs for these additional benefits and expect to see reductions or eliminations of these benefits in the future. On the other hand, it could result in CEO's demanding more equitable treatment relative to their peers and a ratcheting up of perquisites and benefits," Moran concludes.

James F. Reda & Associates' "2007 CEO Perquisite and Supplemental Retirement Study" presents findings on executive perquisites and supplemental retirement plans for 'Fortune' magazine's top 150 public companies. The study also found that:

  • A small percentage of companies (4%) exchanged some perquisites for flexible accounts that can be used by the CEO for any purpose they choose. There are also instances where companies provide for reimbursement for CEO spending on items of their choosing.
  • Dividends on unvested restricted stock and restricted stock units represent a significant benefit to at least 11% of CEOs. The median value of this compensation benefit is $138,400.

About James F. Reda & Associates, LLC

James F. Reda & Associates is an independent compensation and corporate governance consulting firm that works with clients to develop pay structures, manage their talent, and improve their economic performance. Headquartered in New York City, JFR's principal consultants have over 75 years of combined experience with compensation consulting, designing, implementing and communicating performance-oriented compensation programs. Additional information is available at http://www.jfreda.com.

A complimentary copy of James F. Reda & Associates' 2007 Perquisite and Supplemental Retirement Study is available to download, or by contacting Meredith Olson at 646-367-4463.

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