You might want to look at this recent Cooley Alert, Should SEC Revisit Executive Security Perquisite Disclosure?, from our Public Companies and Compensation and Benefits Groups. Following the alarming murder of an insurance company CEO recently, the need for protection and security for CEOs and other executives is now high on the agenda, as are questions about how these items should be reported. Under the guidance set forth in the SEC’s 2006 release, an “item is not a perquisite or personal benefit if it is integrally and directly related to the performance of the executive’s duties. Otherwise, an item is a perquisite or personal benefit if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.” According to the release, the “concept of a benefit that is ‘integrally and directly related’ to job performance is a narrow one.” But, the Alert contends, maybe that approach should be revisited.
In the wake of this tragic event, the Alert suggests, companies may want to “consider reassessing their approach to personal security arrangements for executive[s].” In addition, the Alert advocates, it is time for the SEC “to revisit the treatment of personal security as a perquisite requiring disclosure in a company’s SEC reports. The current SEC guidance forces companies into a catch-22, where a decision to provide personal security protection will require disclosure and draw additional scrutiny, and potentially the ire of proxy advisory firms, while a decision to limit or not provide such protection to avoid disclosure or reduce the amount disclosed will potentially put executives’ safety at risk.” Be sure to check out the Alert!
