Tuesday, April 9, 2013

When Does He Have Time to Work: The Perquisites of the Chairman of Hertz

When Does He Have Time to Work:  The Perquisites of the Chairman of Hertz

I’m picking on Mark P. Frissora, Chairman of Hertz Corporation, because he used the corporate plane and chauffeured car a lot for non-business purposes in 2012.[1]  According to the company’s proxy statement, Mr. Frissora earned $14.5 million last year and has made over $40 million in the past three years.  So Mr. Frissora has more than enough money to pay for his personal jet travel and local transportation.  Those two items came to $559,000.[2]

Etail Due Diligence (2001)

By my rough guess, Mr. Frissora flew about 65,000 to 70,000 miles for personal reasons.  I’m sure Mr. Frissora went to a lot of places on vacation in 2012, but it may be easier just to think of 65,000 miles as 18 round trips to Vail from the company’s headquarters outside New York City.   I’m figuring that he used a mid-sized business jet costing about $3,200 per hour at a cruising speed of about 450 MPH.

The personal car use is more difficult to assess because Hertz combines the cost of the car and the driver into one figure of  $65,676.  Assuming the driver made $50,000 (twice the national average), one-third of the car’s use was personal and the car costs a dollar per mile to operate (nearly twice the IRS rate), we’re looking at 50,000 miles of personal use.  Even if you fiddle with my assumptions, Mr. Frissora spent a ton of time using the car for non-business purposes.

Hertz has 30,200 employees, and if any one other than Mr. Frissora charged the company for personal travel, they’d probably be fired.  Moreover, Mr. Frissora makes over three times as much money as the next highest paid employee of Hertz, Scott Sider.  Surely he can afford to pay for his air travel.

From what I can tell, only three other employees are reimbursed for the personal use of their cars, and those three executives managed only a combined $31,000 worth of personal car use versus Mr. Frissora’s benefit of over $65,000.  It sure seems like the CEO is getting a lot of time off, which raises an obvious question.  Why does he deserve to make $14.5 million a year?

Proxy statements lay out all the bonuses, stock options and grants, severance packages, life insurance premiums, housing allowances, club memberships, executive physicals, tax gross ups, and all the rest of the components of executive compensation.  You might think that all that disclosure would do some good.  You might believe that the riches, large and small, bestowed on them, would somehow embarrass executives. 
I am sure Mr. Frissora thinks he deserves every penny and perquisite, and his board whole-heartedly agrees.  The compensation committee at Hertz consists of the former CEO of Sara Lee Baking, the CFO of Marriott, and the Chairman of Connexus.  When Mr. Frissora isn’t jetting off or being driving some place, he’s approving compensation arrangements for Delphi and Walgreens, for which he earned another $709,000[3] as a director.  Clearly, these folks know how to take care of their own.

When the folks at the top are extraordinarily well compensated and pampered, it is hard to imagine that they have much of an understanding about the people who work the counters, service the cars, and make Hertz run on a day-to-day basis.

[1] The idea for this post came from an article by Nelson D. Schwartz in The New York Times, http://www.nytimes.com/2013/04/07/business/executive-pay-shows-modest-2012-gain-but-oh-those-perks.html?ref=executivepay
[2] He also received $17,943 for personal club memberships, $3,169 for executive physicals, and $1,053 for the security system at his home.                             
[3] He made $453,764 from Delphi in 2011 [no data is available for 2012] and $254,988 from Walgreen.  Mr. Watson, the Chairman of Walgreen made $12 million in 2012, but only $29,426 in personal reimbursement.   Mr. O’Neal, Chairman of Delphi made $5.7 million and $21.1 million in 2011 and 2010, none of which was personal reimbursement.  Delphi went into bankruptcy in 2005, and emerged from Chapter 11 in 2009.

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