Sarbanes-Oxley Act, which was passed in July,
outlawed corporate loans to executive officers,
among other things. The corporate responsibility
law, which applies only to public companies,
also muddled the legality of other practices,
such as the use of company credit cards.
Securities regulators are still wading through
But the problem is
not solely the legality of these fringe benefits.
It's that business leaders find it harder in these
leaner times to justify benefits that could hurt
the bottom line and perhaps even the company's
were part of the heyday of the '90s. But now that
everyone is under such scrutiny, people look at
this stuff and they don't even want the appearance
of impropriety," said Michael P. Maslanka, an
employment law attorney at Godwin Gruber PC in
Dallas and editor of the Texas Employment Law
To be sure, benefit
consultants feel confident that perks will survive
as they have through numerous tax reforms over the
last two decades. Yet companies are reassessing
the types of perks offered and assuring that they
fall within all guidelines.
putting in provisions so that everyone understands
that it's all aboveboard. They want to make it
clear that it's not a sweetheart deal and that
they're not trying to enrich the executive at the
expense of the shareholders," Mr. Maslanka said.
"Before they would maybe take a paragraph to make
this point. Now they want many paragraphs."
that leaders evaluating their executives' benefits
• Determine what is
really a perk. If it helps the company make money,
it's probably not a perk; if only the senior
manager benefits, then it's probably a perk.
• Be careful not to
layer on too many fringe benefits. The total value
of a perk should not make up more than 10 percent
of the total compensation package. Perks do not
include any type of stock option or compensations
based on performance.
• Make sure that
company perks offer a tangible return on
investment, as measured in a senior manager's
productivity. For instance, membership to
executive airline club, which would allow a
manager to work or conduct a meeting while
traveling, may prove more beneficial than a
country club membership.
perception – and exceptions that have grabbed
headlines in recent months – extras such as
corporate jets, chauffeur-driven luxury cars and
memberships at exclusive country clubs have fallen
by the wayside with changes in tax law during the
1980s and 1990s, said Steve Cross, practice leader
at the Houston office of Mercer Human Resource
Companies now are
more likely to offer memberships to athletic clubs
to help managers counter stress. Access to
executive dining rooms also pays off for managers
who regularly schedule business lunches.
useful are those that help executives better deal
with their busy lives," Mr. Cross said.
David Hofritcher, a
principal at Buck Consultants in Chicago, prepares
an annual Executive Perquisites report that looks
at the prevalence of certain benefits.
He said all
benefits and perks should be transparent. They
should not encourage bad behavior.
"It's important the
executives also look at their own compensation
package and scrutinize it. The emphasis should be
pay for pay," he said.