One of the perks of reading company filings during proxy season is, well, perks: We get to read firsthand about all the lavish, bizarre and absurd goodies that companies shower on their directors and executives. But every now and then, we’re frustrated to run into perks that fly just below the radar — we know they’re there, but we can’t get a handle on just how juicy they really are.
That happened this week with MGM Resorts International (MGM), which filed its proxy on Tuesday. There are perks a-plenty out in the open — this is a casino and hotel company, after all. But there are also some that we would love to know more about, but the company’s keeping mum.
First, to set the stage, MGM isn’t shy about throwing its top dogs some nice bones, even if it’s a little less lavish than some of its competitors. MGM Resorts’ directors, for example, are paid an average of $275,000 a year (for part-time work, as we always stress — though MGM’s board did meet 13 times last year). For most of them, that pay includes $14,000 in something called “M life express comps.”
Translation: Perks at MGM properties! M life is MGM’s rewards program, and Express Comps can be used “for your hotel stay, at food and beverage outlets, entertainment venues, or to purchase your M life Moments” — which, in turn, are apparently “unique experiences at participating MGM Resorts International destinations” (whatever that means).
Now, MGM’s proxy suggests this isn’t a mere gratuity for hard-working directors. Rather, the benefit is intended to “permit directors to experience our facilities and to better prepare themselves to provide guidance to us on matters related to product differentiation and resort operations…” We think they’d get a better customer-eye’s view if they actually had to pay for services out of their own pocket, using some of that $275,000 a year in board pay, but never mind.
Chairman and Chief Executive James J. Murren also is no stranger to company perks. His $9.9 million in total compensation for 2011 was roughly level from the year before, but it included $422,023 in personal rides on the company’s jet, $268,919 in personal security services “the majority of which was attributable to costs of security personnel” — and another $100,000 “to be applied to his life insurance premiums or such other uses as he determines”. (Erm, isn’t that what salary is for?)
That gives a nice glimpse into Murren’s finances. But there’s more that we don’t get a good picture of, to judge from a few other lines in the proxy. For example, from the tail-end of the footnote describing executive perks:
“As an owner and operator of full-service hotels, we are able to provide many perquisites relating to hotel and hotel-related services to the [top executive officers] at little or no additional cost to us. In no case did the value of such perquisites, computed based on the incremental cost to us, exceed $10,000 per NEO in 2011.”
In other words, while those “many perquisites relating to hotel and hotel-related services” don’t cost the company a lot in terms of actual cash outlays — and therefore don’t have to be broken out, under the $10,000 threshold — they nonetheless could be worth a lot more to the executives compared to paying the bill themselves. We’ll never know. Elsewhere in the document, the company notes that these perks include access to hotel fitness clubs, “in-town transportation,” “complimentary meals for business purposes at our restaurants,” and a tax-gross up on executive medical benefits (a total of $22,562 for the top five officers).
Meantime, on page 18, in the section detailing related-party transactions, MGM notes that
“Mandalay Resort Group, one of our subsidiaries, is party to a time sharing agreement with Mr. Murren in connection with his personal use of our aircraft. Under the time sharing agreement, Mr. Murren may lease our aircraft, including crew and flight services. See ‘Executive Compensation’ for amounts reimbursed by Mr. Murren and for unreimbursed amounts that are considered perquisites.”
We didn’t find any amounts listed in the Executive Compensation section proper. But the last sentence of a footnote to a table in a footnote to the proxy’s summary compensation table (got that?) indicates that Murren reimbursed the company for $68,445 “for a portion of incremental costs of his personal flights.” That means that from his perspective, he got $490,468 in jet rides for $68,445. Sweet! Of course, access to the private jet is a nice benefit on its own — and has value to the executive — even if he has to pay for it.
To the extent that keeping an eye on executive perks is about making sure the company isn’t wasting money, this lack of detail makes a kind of sense. If luxury hotel perks cost the company less than $10,000 each for five executives, they aren’t going to break the bank, and what do investors care? If Murren is reimbursing the company for some his jet rides, it’s no skin off investors’ noses.
On the other hand, given the history of executive excess in recent years, investors ought to care about how and how much executives are paid from a corporate-governance and accountability standpoint. It’s not just about the cost, but about the entitlement, and about appropriate behavior, conflicts, the appearance of impropriety, reputation, distractions, and more. (Consider Aubrey McClendon’s big, undisclosed loans at Chesapeake (CHK), which cost investors nothing on the face of it, but sure created a stir when they were uncovered.
From that standpoint, it would help to know just how much the top brass at MGM (and elsewhere) are being pampered, even if the company can do it on the cheap.
Perks can be amusing, but plenty of little-noticed company disclosures can be serious. Don’t gamble on spotting everything in the filings — check out footnotedPro, our subscription service exclusively for professional investors, where we identify hidden warning signs and investment opportunities well ahead of the market. For more information, or to inquire about a trial subscription, please email us.