It’s no secret that Cisco Systems (CSCO) has been on a bit of a cost-cutting mission lately. From shuttering its Flip unit that it bought for $590 million in 2009 to its latest-round of 6,500 job cuts announced in July, it’s been trying something — anything — to reel in expenses in an effort to return to the Cisco of yore.
Now, the proxy that Cisco filed earlier this week details one other way that the company plans to rein in costs. By recalling Bangalore-based chief globalization officer Wim Elfrink — his bio (PDF) is here — which the company announced back in May, Cisco is likely to save over $3 million a year. Of course, in order to save that money, first they have to spend. The specific details were in footnote #11 in the proxy.
The part that really popped out at us — even at a company the size of Cisco — was the cost of housing in India: a whopping $631,797. While we’re admittedly not very knowledgeable about the real estate market in Bangalore, the number seems excessive by any reasonable measure, even if, as the proxy notes, it also included “maintenance and domestic household assistance.” Cisco also paid nearly $200K last year for housing assistance and utilities in the U.S., which we’ll assume means paying the mortgage on Elfrink’s home in Silicon Valley, though the proxy isn’t very specific. And the company will spend another $200K to move Elfrink back to the U.S. There was also another $700K or so that the proxy helpfully notes was used for:
personal benefits included in the amounts shown for fiscal 2011 consist of the following: provision of security arrangements, allowances for automobiles, child education, home leave travel, relocation, and fees for tax services; and goods and services differential.
All told, Elfrink’s other compensation — the various perks — added up to $3.8 million, the bulk of which, or $2.1 million, was for “tax equalization benefits” — otherwise known as a gross-up. That gross-up was more than three times higher than it was just two years earlier.
Now here’s where the cost-savings comes in. The proxy notes that in fiscal 2012, Elfrink’s expenses will be “substantially reduced and capped at approximately $508,000.” Total savings? Roughly 85%.
Granted, given Cisco’s size, the numbers may not move the needle all that much, if at all. But savings is still savings. Still, we doubt that those 6,500 people who found out that they were losing their jobs as part of the cost-savings will take much comfort in that.