Directors of Occidental Petroleum Corp. want to keep Chief Executive Ray R. Irani safe. So they spent $774,756 last year on home-alarm systems and around-the-clock security guards for the CEO. "We live in dangerous times," a company spokesman says. "Executives from oil-and-gas companies have been threatened and abducted."
Directors of Valero Energy Corp., a rival oil concern with more than four times Occidental's revenue, aren't as worried. Their spending on security for CEO William R. Klesse last year totaled just $239 for a home-alarm monitoring service, a perquisite recently extended to all Valero workers. Bill Day, a spokesman, notes the company isn't well known.
The disparity in security spending for big-company CEOs emerged in an analysis of 247 recent proxy statements for The Wall Street Journal by James F. Reda & Associates, a New York pay consultancy. The differences reflect risk assessments by outside security advisers, a CEO's tenure and whether a company is involved in high-risk regions, experts say. The 247 companies represent the Fortune 300 companies that had filed their latest proxies at the time of the analysis.
For the most generous boards, "it's almost like an arms race as directors demonstrate how critical their chief executive is to the company," says Mark Borges, a pay consultant at Compensia Inc. in San Jose, Calif.
Of the proxies reviewed, 91 companies reported security expenses to protect their CEOs, and 56 of those specified an amount. Some companies don't disclose a dollar figure because it is below reporting thresholds; others count security as an ordinary business expense. The Securities and Exchange Commission considers security at an executive's residence or during personal travel a perquisite that should be disclosed if the value reaches a certain threshold.
Corporate spending on CEO security may be more prevalent than the survey indicates. Bob Duggan, president of Executive Security International, a training firm in Aspen, Colo., figures at least 75 American CEOs have round-the-clock protection, three times as many as a decade ago. Businesses fear threats from kidnapping, extortion, disgruntled employees and random violence, he says.
The biggest spender in Reda's study was Oracle Corp. The software maker paid about $1.7 million in the year ended May 31, 2007, mainly for guards at residences of Lawrence Ellison, its billionaire CEO and founder. Board members support the outlays because he's so important to Oracle, the latest proxy states. It also says Mr. Ellison paid to install and maintain his home-security systems. Oracle declined to comment.
Next up was Limited Brands Inc., which spent $1.25 million in the year ended Feb. 2 to protect CEO Leslie Wexner, who founded the Columbus, Ohio, retailer in 1963. The total includes an unspecified amount for his personal use of corporate aircraft, which the company requires.
Limited's proxy lacks other details, but people familiar with the situation say the tab covers security for Mr. Wexner's 22,371-square-foot home on a 300-acre estate in nearby New Albany, as well as for other homes and a yacht. The proxy says directors approved the spending because of "the risks associated with Mr. Wexner's role and position." The executive, a prominent Jewish philanthropist, "has been the target of specific threats," an informed individual says. Founder CEOs often become targets of specific threats identified with their religion, the person said. Mr. Wexner declined to comment.
Such justifications for shelling out big bucks to protect corporate chiefs don't sway some activist investors. "Security has become a convenient excuse for getting shareholders to pick up the cost for the CEO's lifestyle," complains Richard Ferlauto, director of corporate governance and pension investment at the American Federation of State, County and Municipal Employees.
Other retailers don't spend as much. Macy's Inc. reported spending $86,956 during the year ended Feb. 2 to protect CEO Terry J. Lundgren. The amount covers a specially equipped SUV driven by a security professional for his commute, personal use and certain business trips. The benefit, recommended by a consultant, ensures the safety of Mr. Lundgren, "who maintains a significant public role," the Cincinnati retailer says in its proxy. (Mr. Lundgren lives and works in New York.)
Six companies that reported spending on CEO security in 2006 didn't divulge any expense last year, Reda found. They include International Paper Co., whose directors spent $52,000 in 2006 to install a home-security system for CEO John V. Faraci after the company's headquarters moved to Memphis, Tenn. Mr. Faraci pays for the ongoing monitoring, spokeswoman Patty Neuhoff says.