Perk Disclosure Rules Give Companies Cover

By Michelle Leder
April 12, 2007

Now that we're in the midst of proxy season, all sorts of perks are starting to pop up like tulips (or weeds depending on your point of view).

Many of these were hidden from investors, not to mention reporters, up until now. Still, while new rules make it mandatory to disclose various perks, many companies are resorting to old tricks to make these perks difficult to find: filing late on a Friday, requiring reporters to piece together two different proxy statements to get the whole story, and using impossibly small -- Enron Beelzebub typeface -- for their disclosure.

Some of the confusion has to do with a revision that the SEC put in place over when perks must be disclosed. While most reporters seem to think that that companies are required to report any perk that costs more than $10,000, the actual rule only requires full disclosure when a single perk costs more than $25,000. So if a company spends $24,000 on a golf club membership and another $20,000 on financial planning, and another $20,000 for a car allowance, they're required to disclose that they spent $64,000 on providing various perks and even list the types of perks provided. But there's no requirement for them to attach a dollar value to each perk.

Take toilet manufacturer American Standard, for example. The company disclosed that its CEO, Frederic M. Poses, received $186,407 for "expenses related to personal security measures," which included the use of a car and driver. But in the proxy, when it came time to disclose how much free American Standard product Poses received, the company chose not to because the amount fell below $25,000.

Of course not all companies are hiding behind the new rules. UST, formerly known as US Tobacco, disclosed that its top executives (and directors) receive $5,000 wine allowances, even though the new rules would have allowed them to hide this from investors.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism