CEO security-tabs fall at Google, FedEx and Disney

Starbucks pays more to protect CEO Howard Schultz

By Matt Andrejczak, MarketWatch April 12, 2010, 2:34 p.m. EDT

SAN FRANCISCO (MarketWatch) — Executives at Kodak and Deere are now paying for their own home-security systems, a sign that executive-security is one perk corporate board’s are scrutinizing more closely.

Indeed, other companies cut back on security expenses, too — especially those known to spend big bucks on protecting their CEO, according to a MarketWatch review of proxy statements filed so far this year by Dow 30 components and larger S&P 500 companies.

The security tab for Google CEO Eric Schmidt fell 42% to $233,542 last year. The bill for FedEx CEO Fred Smith dropped 23% to $461,405, while the cost for Disney CEO Bob Iger dipped 9% to $589,102.

Since 2007, Google (NASDAQ:GOOG) has paid $1.1 million in personal security expenses for Schmidt, FedEx (NYSE:FDX) has paid $1.5 million for Smith, and Disney (NYSE:DIS) has paid $1.9 million for Iger.

Compensation consultant Todd Gershkowitz of Farient Advisors said CEO security is not an egregious perk compared to goodies like country-club memberships, chauffeurs or taxes companies pay on super-sized severance packages for axed CEOs.

But company-provided security “becomes an invasion of privacy, some CEOs don’t want it, some accept it,” said Gershkowitz, who considers CEO security expenditures more of an issue about risk than one of executive perks handed out by directors.

He said he’d like to see more detailed disclosures about CEO security in proxies.

Deere (NYSE:DE) and Kodak (NYSE:EK) won’t pay the bill for residential security anymore, according to their yearly proxy statements filed with the Securities and Exchange Commission.

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. Long-struggling Kodak, which lost $210 million last year, will still pick up the tab for CEO Antonio Perez, however.

At Citigroup (NYSE:C) , the bank won’t 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.

The emphasis corporate boards put on CEO security expenses can vary vastly depending on their culture. IBM (NYSE:IBM) , Dupont (NYSE:DD) and Procter & Gamble (NYSE:PG) require their CEOs to use the corporate jet even for personal travel.

Compare that to UPS (NYSE:UPS) . UPS CEO Scott Davis and other top execs fly commercial when traveling for business.

Terry Lundgren, CEO at Macy’s (NYSE:M) , is provided a car and driver to shuttle him around New York City. That cost more than $261,000 in 2009. Intel (NASDAQ:INTC) CEO Paul Otellini drives himself to work from his San Francisco home to Silicon Valley when he is in town.

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.

CEO security tabs had been on the rise from 2006 through 2008 at Fortune 100 companies, according to Equilar, an executive compensation research firm.

The security tab for Starbucks CEO Howard Schultz has climbed in each of the past three years. It rose 25% to $640,000 in 2009 due to “increased personal security details” and upgrades to Schultz’s residential security systems.

Coke (NYSE:KO) 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% to $488,719.

SEC disclosure rules changed in 2007, forcing companies to illuminate perks valued over $10,000. Before then, companies used studies from boutique security firms to justify the costs as business expenses for federal tax reporting purposes.

The costs to hire bodyguards or armored vehicles, or install home-security systems, pop up in proxy statements of publicly-traded companies, revealing what companies are willing to pay to keep the CEO and their families safe. The SEC deems such costs a perk and the tab is part of the “all other compensation” column in executive compensation tables.

For a larger home, the cost to install a home security system runs from $7,000 to $10,000 and typically includes fire alarms, smoke detectors and sprinkler systems, according to Tim McKinney, group director of the custom home unit at ADT, the home-security firm.

That compares to the set-up cost of $400 to $600 for a regular home, McKinney said.

Executive security is not limited to CEOs of public companies.

Hedge fund managers are concerned, too, said former U.S. Secret Service agent Christopher Falkenberg, whose firm Insite Security has set up an office in Greenwich, Conn., the New York City suburb that is home base for many hedge funds.

Falkenberg, who once protected President Bill Clinton, said he’s been developing family security plans for the spouses and children of hedge fund managers. The aim is to make their families harder targets to would-be criminals.

3M (NYSE:MMM) and Caterpillar (NYSE:CAT) got a scare last year when factory bosses in France were held hostage by laid-off workers who demanded higher severance pay outs.

During the recession, Jeff Sexton, a former United Nations security adviser, said his firm was hired to ensure the safety of human-resource managers and other executives when manufacturing or corporate office workers were about to be laid off.

In some cases, he said, the factories were in small towns and the company was the biggest employer, making it a delicate situation. “It can be really trying and emotional time,” said Sexton, who runs Fairfax, Va.-based Sexton Executive Security.

Starbucks (NASDAQ:SBUX) , which closed 1,000 stores during the economic downturn, has run up a security-tab of $1.6 million for Schultz since 2007.

The coffee giant pays the bill because of the risks associated with his status as a “high-profile founder” of a large, multinational company, the coffee chain said in its proxy.

Schultz “is closely identified with Starbucks brand and the board firmly believes his vision and leadership are critical components of Starbucks success,” the proxy added.

The same could be argued for Apple CEO Steve Jobs. But Apple (NASDAQ:AAPL) lists no security costs for Jobs in its proxy statement. The company couldn’t be reached for comment. Recently, Jobs stopped by Apple’s Palo Alto, Calif. store with his wife and daughter the day the much ballyhooed iPad went on sale.

Microsoft (NASDAQ:MSFT) doesn’t list any security costs for CEO Steve Ballmer, either. The software giant has had at least one incident of note: Former CEO Bill Gates got hit in the face by a cream pie during a 1998 visit with European Union antitrust officials.

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 (NASDAQ: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.

The boards of both tech companies call it an appropriate business expense. Ellison owns 23% of Oracle (NASDAQ:ORCL) . Dell owns 13% of his namesake personal computer maker.

As part of an executive severance agreement, Whirlpool (NYSE:WHR) 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.

Here are some other examples found in recent proxy statements:

• 3M ponied up $35,864 to “complete several projects improving the personal security” of its CEO George Buckley and his family “at their residences.” That paid for monitoring service fees, installation services and materials.

• Former Schering-Plough CEO Fred Hassan was protected with personal bodyguards, home-security system, and a car and driver. The drug maker explained that its executives had received threats from animal rights activists and others because of the products it sells. Since 2006, Schering-Plough had paid $442,196 for those services. Hassan stepped down from Schering-Plough after its merger with Merck (NYSE:MRK) in November 2009.

• Ford Motor Co. (NYSE:F) paid $1.2 million in security costs for its executive chairman Bill Ford, Jr. last year. In 2008, this expense was not listed because Ford (the great-grandson of Henry Ford) didn’t meet the definition of “named executive” under SEC rules. Meanwhile, home-security expenses for CEO Alan Mulally were $43,447, down from $112,114 in 2008.

• Inter-Con Security Systems does work for some Fortune 100 companies, including Wal-Mart Stores (NYSE:WMT) and McDonald’s (NYSE:MCD) . Inter-Con CEO Enrique Hernandez, Jr. also is popular with corporate boards. He is a director at Chevron (NYSE:CVX) , Wells Fargo (NYSE:WFC) , McDonald’s, and Nordstrom (NYSE:JWN).

Copyright © 2010 MarketWatch, Inc. All rights reserved. http://www.marketwatch.com/story/ceo-security-tabs-fall-at-google-fedex-and-disney-2010-04-12

Starbucks pays more to protect CEO Howard Schultz

SAN FRANCISCO (MarketWatch) — Executives at Kodak and Deere are now paying for their own home-security systems, a sign that executive-security is one perk corporate board’s are scrutinizing more closely.

Indeed, other companies cut back on security expenses, too — especially those known to spend big bucks on protecting their CEO, according to a MarketWatch review of proxy statements filed so far this year by Dow 30 components and larger S&P 500 companies.

The security tab for Google CEO Eric Schmidt fell 42% to $233,542 last year. The bill for FedEx CEO Fred Smith dropped 23% to $461,405, while the cost for Disney CEO Bob Iger dipped 9% to $589,102.

Since 2007, Google (NASDAQ:GOOG) has paid $1.1 million in personal security expenses for Schmidt, FedEx (NYSE:FDX) has paid $1.5 million for Smith, and Disney (NYSE:DIS) has paid $1.9 million for Iger.

Compensation consultant Todd Gershkowitz of Farient Advisors said CEO security is not an egregious perk compared to goodies like country-club memberships, chauffeurs or taxes companies pay on super-sized severance packages for axed CEOs.

But company-provided security “becomes an invasion of privacy, some CEOs don’t want it, some accept it,” said Gershkowitz, who considers CEO security expenditures more of an issue about risk than one of executive perks handed out by directors.

He said he’d like to see more detailed disclosures about CEO security in proxies.

Deere (NYSE:DE) and Kodak (NYSE:EK) won’t pay the bill for residential security anymore, according to their yearly proxy statements filed with the Securities and Exchange Commission.

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. Long-struggling Kodak, which lost $210 million last year, will still pick up the tab for CEO Antonio Perez, however.

At Citigroup (NYSE:C) , the bank won’t 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.

The emphasis corporate boards put on CEO security expenses can vary vastly depending on their culture. IBM (NYSE:IBM) , Dupont (NYSE:DD) and Procter & Gamble (NYSE:PG) require their CEOs to use the corporate jet even for personal travel.

Compare that to UPS (NYSE:UPS) . UPS CEO Scott Davis and other top execs fly commercial when traveling for business.

Terry Lundgren, CEO at Macy’s (NYSE:M) , is provided a car and driver to shuttle him around New York City. That cost more than $261,000 in 2009. Intel (NASDAQ:INTC) CEO Paul Otellini drives himself to work from his San Francisco home to Silicon Valley when he is in town.

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.

CEO security tabs had been on the rise from 2006 through 2008 at Fortune 100 companies, according to Equilar, an executive compensation research firm.

The security tab for Starbucks CEO Howard Schultz has climbed in each of the past three years. It rose 25% to $640,000 in 2009 due to “increased personal security details” and upgrades to Schultz’s residential security systems.

Coke (NYSE:KO) 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% to $488,719.

SEC disclosure rules changed in 2007, forcing companies to illuminate perks valued over $10,000. Before then, companies used studies from boutique security firms to justify the costs as business expenses for federal tax reporting purposes.

The costs to hire bodyguards or armored vehicles, or install home-security systems, pop up in proxy statements of publicly-traded companies, revealing what companies are willing to pay to keep the CEO and their families safe. The SEC deems such costs a perk and the tab is part of the “all other compensation” column in executive compensation tables.

For a larger home, the cost to install a home security system runs from $7,000 to $10,000 and typically includes fire alarms, smoke detectors and sprinkler systems, according to Tim McKinney, group director of the custom home unit at ADT, the home-security firm.

That compares to the set-up cost of $400 to $600 for a regular home, McKinney said.

Executive security is not limited to CEOs of public companies.

Hedge fund managers are concerned, too, said former U.S. Secret Service agent Christopher Falkenberg, whose firm Insite Security has set up an office in Greenwich, Conn., the New York City suburb that is home base for many hedge funds.

Falkenberg, who once protected President Bill Clinton, said he’s been developing family security plans for the spouses and children of hedge fund managers. The aim is to make their families harder targets to would-be criminals.

3M (NYSE:MMM) and Caterpillar (NYSE:CAT) got a scare last year when factory bosses in France were held hostage by laid-off workers who demanded higher severance pay outs.

During the recession, Jeff Sexton, a former United Nations security adviser, said his firm was hired to ensure the safety of human-resource managers and other executives when manufacturing or corporate office workers were about to be laid off.

In some cases, he said, the factories were in small towns and the company was the biggest employer, making it a delicate situation. “It can be really trying and emotional time,” said Sexton, who runs Fairfax, Va.-based Sexton Executive Security.

Starbucks (NASDAQ:SBUX) , which closed 1,000 stores during the economic downturn, has run up a security-tab of $1.6 million for Schultz since 2007.

The coffee giant pays the bill because of the risks associated with his status as a “high-profile founder” of a large, multinational company, the coffee chain said in its proxy.

Schultz “is closely identified with Starbucks brand and the board firmly believes his vision and leadership are critical components of Starbucks success,” the proxy added.

The same could be argued for Apple CEO Steve Jobs. But Apple (NASDAQ:AAPL) lists no security costs for Jobs in its proxy statement. The company couldn’t be reached for comment. Recently, Jobs stopped by Apple’s Palo Alto, Calif. store with his wife and daughter the day the much ballyhooed iPad went on sale.

Microsoft (NASDAQ:MSFT) doesn’t list any security costs for CEO Steve Ballmer, either. The software giant has had at least one incident of note: Former CEO Bill Gates got hit in the face by a cream pie during a 1998 visit with European Union antitrust officials.

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 (NASDAQ: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.

The boards of both tech companies call it an appropriate business expense. Ellison owns 23% of Oracle (NASDAQ:ORCL) . Dell owns 13% of his namesake personal computer maker.

As part of an executive severance agreement, Whirlpool (NYSE:WHR) 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.

Here are some other examples found in recent proxy statements:

• 3M ponied up $35,864 to “complete several projects improving the personal security” of its CEO George Buckley and his family “at their residences.” That paid for monitoring service fees, installation services and materials.

• Former Schering-Plough CEO Fred Hassan was protected with personal bodyguards, home-security system, and a car and driver. The drug maker explained that its executives had received threats from animal rights activists and others because of the products it sells. Since 2006, Schering-Plough had paid $442,196 for those services. Hassan stepped down from Schering-Plough after its merger with Merck (NYSE:MRK) in November 2009.

• Ford Motor Co. (NYSE:F) paid $1.2 million in security costs for its executive chairman Bill Ford, Jr. last year. In 2008, this expense was not listed because Ford (the great-grandson of Henry Ford) didn’t meet the definition of “named executive” under SEC rules. Meanwhile, home-security expenses for CEO Alan Mulally were $43,447, down from $112,114 in 2008.

• Inter-Con Security Systems does work for some Fortune 100 companies, including Wal-Mart Stores (NYSE:WMT) and McDonald’s (NYSE:MCD) . Inter-Con CEO Enrique Hernandez, Jr. also is popular with corporate boards. He is a director at Chevron (NYSE:CVX) , Wells Fargo (NYSE:WFC) , McDonald’s, and Nordstrom (NYSE:JWN).

Copyright © 2010 MarketWatch, Inc. All rights reserved. http://www.marketwatch.com/story/ceo-security-tabs-fall-at-google-fedex-and-disney-2010-04-12

Exit Strategy

by Christian L. Wright | Published May 2010

When the boss says go, it’s hard to say no—even if it means traveling to some of the less predictable corners of the globe. Christian L. Wright reports on the companies that spring business travelers out of tight spots and how to stay safe when work takes you far from home

When Justin Case (not his real name) and his brother found themselves in the middle of a violent protest high in the Andes in 2007, they called the emergency medical and security service International SOS for help. International SOS staffers immediately advised the brothers to fill the bathtub, in case a fire broke out; put money in their shoes, in case they had to run; and avoid the police station, since it was likely a target of the protesters. Within 48 hours, International SOS had returned the brothers to Lima, shaken but safe. “When I look at pictures of a war zone now,” Justin says, “it reminds me of what it was like.”

Between the narrowly averted military coup in Turkey in 2008, this winter’s sudden cholera outbreak in Mozambique, the earthquakes in Haiti and Chile, and frequent kidnappings from Mexico City to Kathmandu, it can look like a real jungle out there. In fact, the world’s a pretty safe place, with only about three percent of travelers ever falling victim to a crime and far fewer getting caught up in civil strife or natural disaster. Even so, the security industry is growing apace as increasing numbers of companies are sending more employees into remote or unstable places and realizing that it’s good business sense to contract an outside firm to help monitor their workforce overseas.

A range of U.S. security and risk management services consult with both multinational companies and individuals. For example, iJET Intelligent Risk Systems, a full-service security outfit, works primarily with corporations, tracking and supporting upwards of 400,000 business travelers in any given month (the company evacuated 186 clients from Haiti after the January earthquake). On the other hand, half the travelers who hire Clayton Consultants, which specializes in kidnapping, are private individuals. International SOS and Assist America are essentially medical emergency services—think of them as an international 911—sometimes working in concert with risk management experts. And then there are companies like Granite Intelligence, in New York, that offer executive protection—in other words, bodyguards. “It’s not unlike what the secret service does for the president but on a much smaller scale,” says Jeffrey Mueller, co-founder of Granite.

Still, despite the growth in the security industry, a 2007 survey conducted by the U.K.-based firm Control Risks revealed that half of U.S. business travelers polled reported that there was no clear travel security policy at their company and 23 percent said their firm provided no security support at all. Clearly, for business as well as leisure travelers, it’s ultimately up to the individual to be his or her own best risk manager. According to Randy Spivey, CEO and founder of the Center for Personal Protection & Safety, the degree of risk abroad can be summed up by three factors. “Where you’re going, whom you work for, and what you’re doing there. If you’re tied to the coffee industry,” he explains, “in certain parts of Latin America that’s a threat to the drug trade.” In general, one of the biggest threats to the international business traveler is kidnapping—Clayton Consultants handled 40 cases worldwide in 2009—particularly in Latin America, where fully half of all kidnaps-for-ransom take place. Kidnap risk is also higher in oil-rich parts of Africa and the Middle East and in Southeast Asia, where growing economies are attracting more foreigners looking to drum up business. Threats of terrorism are particularly high in Afghanistan, India, Iraq, Pakistan, Sudan, and Yemen. Civil unrest and natural disasters round out the list.

ALL IN THE PREPARATION

You don’t have to hire a security expert to reduce your chances of ending up in a tight spot overseas. In fact, a little preparation can go a long way in minimizing risk and putting you in the best position to respond to the unexpected. “Be a bit obsessive-compulsive” in your planning, advises James Moulton, field security officer for the Global Fund to Fight AIDS, Tuberculosis and Malaria, who has lived and worked in Haiti and the Niger Delta. Moulton and others recommend that travelers to off-the-beaten-path destinations study up on the history, culture, customs, government, religions, and possible risks (natural as well as man-made) well before departure. For instance, if you’re scheduled to head to a politically unstable country and you learn that you’ll be there during its national elections, you might want to change your travel dates. If your company has no library of dossiers on every place the boss might send you, or hasn’t hired an outside company that does, you can refer to the U.S. State Department alerts and advisories online (state.gov/travel), and you can tailor daily e-mail digests from the Overseas Security Advisory Council (osac.gov) to stay current on regions that are of interest to you. To further understand conditions on the ground, some broad overview maps are available online, such as the Risk Atlas from the magazine Risk Management, and ASI Global’s Kidnap & Ransom Threat Map (www.asiglobalresponse.com/downloads/KR_threat_map.pdf).

In an age when the ability to make a phone call or send an e-mail is taken for granted, it’s easy to overlook the issue of communications on a trip abroad. Big mistake. “Your ability to communicate on a moment’s notice could be the difference between life and death,” says Alex Puig, a director at Travel Security Services, a joint venture between Control Risks and International SOS. The Global Fund’s Moulton agrees. “During a coup or rumors of one, the first thing to go down is the telephone network, at precisely the time you need it most.” The answer? A satellite phone, especially “in volatile environments or remote areas where power and cell phone coverage cannot be guaranteed,” Moulton says.

In most parts of the world, though, even the humble cell phone can be a powerful tool in times of trouble. Text messaging, for instance, is still a viable way to communicate when phones are jammed and you can’t make a call. There’s even a 99-cent app called iWitness, available on iTunes, that works on the iPhone and BlackBerry and sends up to 15 contacts a distress signal, notifying them of your whereabouts when you activate the alarm.

Sometimes a phone call is all that’s needed to get you out of a jam. A few years ago, when a car carrying some American businessmen in a remote part of India hit a rickshaw, an angry crowd of about 300 quickly gathered. Although the car was driven by an Indian, the crowd wanted to lynch the Americans. Luckily, they were able to phone colleagues in the vicinity, who quickly came and ushered them to safety.

THE BEST DEFENSE

CLAYTON CONSULTANTS Analyzes the risk potential for any given trip; offers skills training, including lessons in evasive driving and handling firearms; provides response teams for kidnap-for-ransom, extortion, and wrongful detention. Cost: $1,500-$3,000 per consultant per day.

GRANITE INTELLIGENCE Sends an advance team to secure the destination; coordinates safe transportation; vets hotels; provides bodyguards; conducts counter-surveillance and background checks. Cost: $5,000-$20,000 per day, depending on the destination and number of personnel.

iJET INTELLIGENT RISK SYSTEMS Provides destination reports and safety advice; dispenses real-time alerts to e-mail addresses or phones; monitors airlines safety standards; vets hotels; staffs a 24-hour hotline; arranges emergency evacuations. Cost: $5,000 per year for an organization.

INSITE SECURITY Geared to top executives and high-net-worth individuals; sends an advance team to secure the destination; vets hotels; coordinates safe transportation; conducts counter-­surveillance, emergency evacuations, and kidnap-and-ransom negotiations. Cost: From $6,000 for an individual trip.

TRAVEL SECURITY SERVICES This joint venture between International SOS and Control Risks staffs a 24-hour security and medical hotline and arranges evacuations. Cost: From $435 per year for independent travelers.