Companies have been slashing almost every cost imaginable to survive the recession, yet they are spending more than ever to calm CEOs who fear for their personal safety.
Starbucks, which has laid off workers, closed stores and switched from whole to 2% milk to save pennies a gallon, bumped its spending to $511,079 last year on the personal and home security of CEO Howard Schultz. FedEx, which quit matching employee 401(k) contributions, spent $595,875 on the security of CEO Fred Smith. Walt Disney spent $645,368 for CEO Robert Iger; Occidental Petroleum spent $575,407 for Ray Irani; and McKesson spent $401,706 for John Hammergren.
Be it paranoia or prudence, corporate spending on CEO safekeeping is escalating in the face of painful cutbacks, and not by a little. The median spending on personal and home security for CEOs at the 100 largest publicly traded companies was $65,348 in 2008, up 123% from $29,291 in 2007, according to executive compensation research firm Equilar. Ten companies alone spent a total of $4.6 million on CEO security in 2008, 40% more than the 10 biggest spenders of 2007.
Are such fears legitimate — the money wisely spent with every dollar so scrutinized? Companies say yes in their annual proxy filings with the Securities and Exchange Commission, stating that few expenditures are more aligned with the interest of shareholders than safeguarding their corporate leadership. Starbucks says in its proxy that among all perquisites paid to executives, security is "particularly" provided for the company's benefit.
In times of unpopularity, CEOs can be targets. Last month, the Austrian vacation home of Novartis CEO Daniel Vasella was burned, and police suspect animal-rights extremists. That followed July vandalism when his mother's urn was stolen from a cemetery, where the grave of his sister, who died at age 19, also was desecrated and someone added crosses with the names of Vasella and his wife.
"Given several notable incidents of violence towards executives, it doesn't come as a surprise that companies are taking increased measures," Equilar CEO David Chun says.
The movie industry has largely escaped the recession, and John Marshall, CEO of Commonwealth Studios, says any threat now is probably no worse than before. "Still, when I get in the car I hit the button that locks all the doors, all the little things available to me," says Marshall, whose home is gated, with an electronic system to warn of intruders. If the alarm sounds, he and his wife have a planned escape route. At work, Marshall contracts for around-the-clock guards and also pays what he describes as "six figures" for a security consultant.
Tough times, tough security
Dell was the security champ among the Fortune 100, spending $1,164,625 protecting CEO Michael Dell in 2008. "The board believes that Mr. Dell's personal safety and security are of vital importance," says the company proxy. Dell spokesman Jess Blackburn added that it would be more appropriate to look at salaries, bonuses and other perks, and not focus on security alone.
But CEO security is up like no other perk, and it may be no coincidence that increased spending comes at a time when the image of CEOs is so battered that the public gives them approval ratings worse than members of Congress, according to Rasmussen Reports. CEOs have responded to public outrage by more often paying out of their own pockets for country club memberships and personal use of the corporate jet.