ExecutiveLoyalty.org

​​​Perquisites -- for SEC Executive Compensation Disclosure Purposes

SEC Item 402 Disclosure Rules (for proxy statements):

• Perquisites and personal benefits may be excluded as long as the total value of all perquisites and personal benefits for a named executive officer is less than $10,000. If the total value of all perquisites and personal benefits is $10,000 or more for any named executive officer, then each perquisite or personal benefit, regardless of its amount, must be identified by type. If perquisites and personal benefits are required to be reported for a named executive officer pursuant to this rule, then each perquisite or personal benefit that exceeds the greater of $25,000 or 10% of the total amount of perquisites and personal benefits for that officer must be quantified and disclosed in a footnote. The requirements for identification and quantification apply only to compensation for the last fiscal year. Perquisites and other personal benefits shall be valued on the basis of the aggregate incremental cost to the registrant. With respect to the perquisite or other personal benefit for which footnote quantification is required, the registrant shall describe in the footnote its methodology for computing the aggregate incremental cost. Reimbursements of taxes owed with respect to perquisites or other personal benefits must be included in column (i) and are subject to separate quantification and identification as tax reimbursements (paragraph (c)(2)(ix)(B) of this Item) even if the associated perquisites or other personal benefits are not required to be included because the total amount of all perquisites or personal benefits for an individual named executive officer is less than $10,000 or are required to be identified but are not required to be separately quantified.
  
• Source of the above: Footnote 4 to the Instructions to Item 402(c)(2)(ix).
  

News:
2020.06.16 "Recent SEC Action Signals Agency’s Close Scrutiny of Company Perk Disclosures"- alert from Meridien Compensation Partners, which notes five different SEC actions, including this one: "Most recently, on June 4, 2020, the SEC imposed a $900,000 civil penalty on Argo Group International Holdings (“Argo”) due to the company’s failure to disclose in its definitive proxy statements for fiscal years 2015 through 2019 over $5.3 million of perquisites and personal benefits provided to its former CEO and Board Chair, Mark E. Watson III. Following an internal investigation, Mr. Watson agreed to reimburse Argo for certain perquisites and personal expenses and ultimately resigned."

2017.12.12  SEC Enforcement: Inadequate Perquisite Controls and Disclosures, and CEO Abuses.  The SEC's news release begins by saying that the SEC had "charged a biopharmaceutical company with committing a series of accounting controls and disclosure violations, including the failure to properly report as compensation millions of dollars in perks provided to its then-CEO and then-CFO. . . . According to the SEC, Tennessee-based Provectus lacked sufficient controls surrounding the reporting and disclosure of travel and entertainment expenses submitted by its executives.  The order further finds that Provectus’ former CEO, Dr. H. Craig Dees, obtained millions of dollars from the company using limited, fabricated, or non-existent expense documentation, and that these unauthorized perks and benefits were not disclosed to investors." 

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2015.11.03  Survey Shows CFO Perk Levels Have Stabilized. This article in CFO.com begins with the following summary:

• ​According to research from Compensation Advisory Partners (CAP), the median value of CFO perks among Fortune 500 companies held steady at $24,900 in 2014. Back in 2012 that figure fell sharply to $21,400, compared with $36,200 the year before, then inched up to the $24,900 mark in 2013.
  

2015.Sept.07   Perquisites Remain Toxic . . . Settlement of SEC Enforcement Action
From investor reactions to public disclosures to SEC enforcement aimed at inadequate disclosures, executive perquisites continue to nag companies that make broad use of company-provided aircraft, housing, legal or tax services, club memberships, and other perquisites. In settling SEC charges that involved nearly $500,000 of unreported executive benefits, not only did MusclePharm agree to pay a $700,000 fine and to use an SEC-approved independent monitor for its governance and audit practices, but the head of its audit committee had to pay a $30,000 fine and two other executives had to pay $180,000 in fines.  These fines reflect the recently-announced policies of the Department of Justice and the SEC to aimed at imposing personal liability on those responsible for corporate misconduct.  

2015.Mar.31   SEC Enforcement Action re Inadequate Disclosure of CEO Perqs
See this Fortune article, which discusses the SEC's Complaint:

• The U.S. Securities and Exchange Commission charged the Silicon Valley-based technology company Polycom  PLCM 1.17%  and its former chief executive on Tuesday over allegations they hid more than $200,000 in personal perks from investors.
  
• Polycom has agreed to settle charges over inadequate internal controls and disclosure violations and pay $750,000, while the SEC’s case against former Polycom CEO Andrew Miller will be litigated in federal court, the SEC said.
  

2013.Mar.31 Aircraft Perquisites -- applicable rules and disclosures discussed in Aircraft Perqs.

2012.Feb.22  SEC Expert re What is a Perquisite (for Executive Comp Disclosure Purposes).  In litigation against two CFOs re their failure to disclose perquisites provided for the CEO, the SEC has prevailed in a motion to have its expert testify about a "primary purpose" methodology that is applicable under from the Internal Revenue Code for determining whether an item is a business or a personal expense. The federal district court decision in SEC v. Das states that --

• "Contrary to the Defendants' assertion, a comparison of the two methodologies reveals that a methodology borrowed from the IRC [Internal Revenue Code] would be less conservative and rigorous, and therefore, should result in fewer items being classified as perquisites, than the SEC methodology"; and
  
• "Although such a methodology might not reveal the exact amount of perquisites received by Info's CEO, it would not prejudice the Defendants, and it would be helpful to the jury because it is relevant and reliable to show the general scope of the perquisites received by Info's CEO during the relevant time period."