We use cookies to collect information about how our website is used and to improve the visitor experience. You can change your browser’s cookie settings at any time. Please review our privacy policy for more information. OK
This week the SEC announced charges against Hilton Worldwide Holdings for failing to disclose approximately $1.7 million worth of perquisites related to personal use of the company’s corporate jet and executive hotel stays.
This enforcement action and a recently released compliance and disclosure interpretation (C&DI) outlining some pertinent perquisite issues that may come up during the COVID-19 pandemic are signals that the commission is focusing on perk identification and disclosure, sources say. Governance experts suggest that compensation committees take a closer look at perquisite disclosures, particularly surrounding jet use in light of these enforcement actions and travel impacts stemming from the pandemic.
“Companies are really trying to limit perks because it looks bad and rarely gets away from activist or employee scrutiny,” says Deb Lifshey , a managing director in Pearl Meyer’s New York office. “The rationale is that the executive can afford to pay for small incremental perks, or it might be better to instead increase the salary or [bonus] target opportunities.”
Meanwhile, the COVID-19 pandemic stymied travel across a wide range of industries, for personal and business purposes. Lifshey says for the most part, executives “aren’t traveling that much.”
But now that executives are beginning to travel once again as businesses reopen, stakeholders are continuing jet use scrutiny, as Agenda has reported. Companies need to weigh whether the health and safety risks posed from traveling commercial during a pandemic outweighs the risk of disclosing high personal jet use costs, Lifshey says.
For example, companies might want to allow older executives or executives with preexisting conditions to use the corporate jet for travel, but it is important to determine whether this might be a perk or integral to performing the executive’s duties, Lifshey adds.
“Companies are forced to really examine this balance,” Lifshey says. “Compensation committees might want to ask, ‘Do we want to just put our CEO in a bubble and make sure they are OK and take the hit on personal travel?’”
Lifshey says the examples listed in the C&DI “muddied the waters.” For example, Lifshey says local stay-at-home orders are lifted for many states, so if an executive chooses to continue to work from home despite the lack of governmental intervention, is the technology needed for him/her to do so now considered a perquisite?
"The new [C&DI] doesn't change anything; for me it complicated matters," Lifshey says. "These examples might not be relevant now or months from now. There are gray areas surrounding a lot of these perquisite questions, but compensation committees ultimately need to ask themselves, does it smell bad if we aren't reporting it?"