Perks: what 2005 proxy statements reveal; With more transparency in financial statements, executive perks are beginning to garner more notice. As a result, many companies are disclosing more information--voluntarily.

• Author: Partigan, John C.
• Position: Executive compensation

Citing concern that companies are not disclosing the personal use of company planes and similar perks, last October the director of the Division of Corporation Finance at the Securities and Exchange Commission (SEC) sought to change that. In a speech to the National Association of Stock Plan Professionals, Alan Beller encouraged public companies to make clear and concise disclosure in their upcoming proxy statements of all compensation earned by or paid to their executive officers, whether or not such disclosure would be required under the detailed tables and instructions of the SEC's existing rules.

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To determine what effect, if any, Beller's statements may have had on company disclosure practices in the 2005 proxy season, the author reviewed the proxy statements filed by the 100 largest U.S. public companies from the most recent Fortune 500 list, which ranks companies based on their reported revenues for 2004. The purpose of the survey was to determine which companies followed "best practices" by making voluntary disclosure of perks which were not required to be disclosed under existing SEC rules.

What Are Considered 'Perks?'

Perks that appear in the proxy statement are personal benefits that are received from the company or its subsidiaries by the named executive officers (normally the top five executives, based on their annual salary and bonus), as expressed in Item 402 of SEC Regulation S-K. There is sometimes a hazy line between a perk--which must be disclosed in the company's proxy statement if it exceeds certain thresholds (see below)--and a business expense.

For example, in his speech, Beller expressed the view that security concerns alone are not sufficient to allow companies to treat all executive travel (in company planes and company cars) as business expenses that need to be disclosed. He also noted that a benefit available to employees generally on a non-discretionary basis is probably not a perk. However, if the benefit is available for only a chosen few or is selected on a discretionary basis, perk disclosure may be required.

2005 Voluntary Perks Disclosures

Perks are disclosed in the "Other Annual Compensation" column of the company's summary compensation table, which is included in its proxy statement. The dollar value of perks and other personal benefits is not required to be disclosed in the table unless the dollar value exceeds $50,000 (or, if less, exceeds 10 percent of the named executive...