Private securityLarge U.S. companies allocate less money to executive security

Published 30 April 2010

The money spent on protecting senior executives in crime-ridden countries such as South Africa and Brazil, and in many Central American countries, is increasing every year; in these countries, targeting executives and their families for ransom is now a profitable industry; in the United States, however, the trend is in the other directions - companies pay less and less to protect their executives, evidence that executive-security is one perk corporate boards are scrutinizing more closely

In other countries – notably lawless South Africa and a swath of Central and Latin American countries from Mexico to Brazil – the protection of senior executives is a booming business. In some of these countries – especially South Africa and Brazil – private protection of anyone with means is now the norm. Police forces in these countries are small, poorly paid, and thoroughly corrupt. Moreover, in many of these countries the population views the government and its agencies with justified suspicion.

It is thus interesting to note that in the United States the recent trend is in the other direction: top corporations pay less and less for the personal protection of their senior executives.

MarketWatch’s Matt Andrejczak quotes Equilar, an executive compensation research firm, to say that CEO security tabs had been on the rise from 2006 through 2008 at Fortune 100 companies. Andrejczak writes that since then the trend has reversed. He reviewed proxy statements filed so far this year by Dow 30 components and larger S&P 500 companies, and offers a fascinating discussion of this trend, evidence that executive-security is one perk corporate boards are scrutinizing more closely. Here are some numbers:

  • Executives at Kodak and Deere are now paying for their own home-security systems
  • The security tab for Google CEO Eric Schmidt fell 42 percent to $233,542 last year (since 2007, Google has paid $1.1 million in personal security expenses for Schmidt)

    • The bill for FedEx CEO Fred Smith dropped 23 percent to $461,405 (since 2007, FedEx has paid $1.5 million for Smith’s security)

  • The cost for Disney CEO Bob Iger’s security dipped 9 percent to $589,102 (since 2007, Dis/div> ney has paid $1.9 million for Iger’s security)
  • Deere and Kodak will not pay the bill for residential security anymore
    • Starting this year, Deere said eight executives will have to reimburse the company for security services that had included “drive-by surveillance and response to security alarms” for certain executives by Deere’s corporate security staff.
    • This perk cost Deere less than $19,000 last year, but the exact number is unknown since the tractor maker lumped the cost in with spouses attending company events.
  • Kodak paid a one-month bill of $876 for five executives, before dropping the perk in February 2009. Kodak, which lost $210 million last year, will still pick up the tab for CEO Antonio Perez, however.
  • Citigroup will not be paying for personal bodyguards and armored vehicles for Roberto Hernandez Ramirez, a Mexican-based banking executive who stepped off Citi’s board last spring. Since 2007, Citi had paid $5.4 million for his security, office space, and airplane use.

Andrejczak notes that the emphasis corporate boards put on CEO security expenses can vary vastly depending on their culture.

  • IBM, Dupont, and Procter & Gamble require their CEOs to use the corporate jet even for personal travel.
  • UPS CEO Scott Davis and other top execs fly commercial when traveling for business.
  • Terry Lundgren, CEO at Macy’s is provided a car and driver to shuttle him around New York City. That cost more than $261,000 in 2009.
  • Intel CEO Paul Otellini drives himself to work from his San Francisco home to Silicon Valley when he is in town.

Andrejczak writes that “since proxies from S&P 500 companies are still trickling out, it’s too early to determine if the nation’s 500 largest companies cut CEO security perks as they slashed other operating costs during the so-called Great Recession.”

 

Some companies are still increasing the amount of money they allocate to executive protection:

  • The security tab for Starbucks CEO Howard Schultz has climbed in each of the past three years. It rose 25 percent to $640,000 in 2009 due to “increased personal security details” and upgrades to Schultz’s residential security systems.
  • Coke paid more to protect Jose Octavio Reyes, its top executive in Mexico, where drug violence worsened last year. His security bill, which comes with bodyguards and 24-hour residential security, rose 36 percent to $488,719.
  • Oracle CEO Larry Ellison and Dell CEO Michael Dell are among the most-protected U.S. tech executives — at least according to security costs listed in regulatory filings.
    • In the past three years, Oracle has paid $4.6 million for a residential security program that includes security guards at Ellison’s residence.
    • Dell has paid $3.2 million for bodyguards and home-security for its founder. Dell is known to send advance security detail teams to scout out certain locations where the CEO will be.
    • Whirlpool is still on the hook to the pay for the cost of a car and driver for Paulo Periquito, its former head of Latin America who lives in Brazil. He resigned at the end of 2009 and he keeps the car and driver through April 2012, according to a regulatory filing. The cost of the car and driver was $104,352 in 2009.