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Herman Trend Alert: New SEC Regs Lead to Decrease in Executive Perks

As management consultants, we encourage candidates to evaluate prospective employers based on the total package of compensation, now called, "total rewards," including fringe benefits and perquisites. Recently, the compensation research firm Equilar conducted a study detailing trends in "total rewards" for top executives of the 95 largest public companies by revenue in the United States. Equilar tracks nine major areas of perks, including corporate housing benefits, personal and home security and country club memberships. This year’s study found the median values of seven of the nine major CEO perquisites it tracks had decreased.

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Herman Trend Alerts are written by Joyce Gioia, a strategic business futurist, Certified Management Consultant, author, and professional speaker. Archived editions are posted at http://www.hermangroup.com/archive.html

From “Herman Trend Alert,” by Roger Herman and Joyce Gioia, Strategic Business Futurists

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GREENSBORO, N.C. — As management consultants, we encourage candidates to evaluate prospective employers based on the total package of compensation, now called, "total rewards," including fringe benefits and perquisites. Recently, the compensation research firm Equilar conducted a study detailing trends in "total rewards" for top executives of the 95 largest public companies by revenue in the United States.

Equilar tracks nine major areas of perks, including corporate housing benefits, personal and home security and country club memberships. This year’s study found the median values of seven of the nine major CEO perquisites it tracks had decreased.

New Securities and Exchange Commission (SEC) rules require companies to disclose perks that cost more than $10,000; previously, the threshold for reporting was $50,000. Not surprisingly, this new level of disclosure has led to a decline in upscale extras. While these top public companies are spending more in two of the study’s included areas of CEO perks, in general, executives are receiving the same or fewer "goodies" than last year.

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From 2006 to 2007, the median value of CEO perquisites related to financial planning benefits (including other professional services such as tax preparation) declined by 9.2 percent, while expenditures for the personal use of corporate aircraft declined by 9.8 percent.

The decreases reflect the concern of boards of directors to seem vigilant in their financial oversight. In fact, some companies are actually reporting more than is required by law to demonstrate their transparency.

Only two areas showed increases. First, the extra cash to compensate for taxes assessed on the attributed income of fringe benefits, increased in 2007 by an unexpected 43.6 percent. Second, the median value of personal and home security benefits for these executives showed an increase of 14.4 percent. The latter really only increased due to the inclusion of Michael Dell whose company spent more than $1 million on his home security system.

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These trends reflect that privately held organizations have an advantage over others, because there is no required reporting. Private companies will be able to "sweeten the deals" for prospective executives, without concern about SEC oversight. Private companies will surely win this war for executive talent.

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