In the annals of executive decorating, the disclosure in IBM’s proxy statement filed earlier this week probably doesn’t rank quite as high as former Tyco CEO Dennis Koslowski’s $6,000 shower curtain or former Merrill Lynch CEO Jon Thain’s $35,000 commode. But that’s only because we’re lacking some of the details on what IBM spent $1.03 million on for what it describes in its proxy statement as “space renovation” for former Chairman and CEO Samuel J. Palmisano.
The disclosure is one of several in footnote 9 on pg. 40 and it’s definitely a bit vague. It describes the $1.03 million spent on Palmisano as “personal use of Company autos, retirement items, office payments and administrative support, including space renovation.” A page earlier, IBM has a slightly different explanation of the $1.03 million: “payments relating to furnished office space and administrative support provided to Mr. Palmisano after his December 1, 2012 retirement, as well as amounts for the renovation of the space.” The amount represents just about half of the $2.2 million included under “all other compensation” for Palmisano in IBM’s summary compensation table.
Deeper into the filing, the company adds that it has agreed to provide Palmisano with office space and administrative support “until such time that he notifies the Company that he no longer wishes to maintain the office”, which could help explain the hefty price tag. Clearly, co-working spaces like WeWork or even a more mainstream option like Regus weren’t an option. Of course, the filing also notes that Palmisano “may be asked from time to time” to provide consulting services, for which he’ll be paid $20,000 per day for each day he provides four or more hours of services. Any consultant who makes that kind of money needs fancy digs.
As we’ve footnoted before, Palmisano is already doing pretty well in retirement. Last year, we estimated his post-retirement benefits at around $225 million. The number in the proxy puts it closer to $271 million, and that doesn’t include a $37 million distribution made earlier in the year.
That’s a very big number, even considering Palmisano’s careful stewardship of IBM that allowed the company to avoid many of the pitfalls that seriously hurt competitors like Dell (DELL) and Hewlett-Packard (HPQ). We should also give IBM and/or Palmisano credit where it’s due: if Palmisano had retired after Dec. 31, instead of Dec. 1, most of these details would have forever been hidden since by the time IBM’s 2013 proxy came out, Palmisano would no longer have been a named executive.
Despite that, $1.03 million on renovating office space seems like a lot of money to spend. Merrill Lynch, for example, spent only slightly more renovating Thain’s office. When the Thain story broke, the Wall Street Journal published a list detailing the various expenses. Presumably, a similar list exists for the Palmisano space too.