The Town Car indicator…

October 4, 2006

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They say the car you drive says a lot about you. So you’d assume that the amount of money a company spends on providing a car to an executive says something too. Yet two proxies filed last week by two Manhattan-based companies in the fashion industry provide an interesting contrast on the car habits of Manhattan’s top executives.

First, take the proxy filed by leather goods company Coach Inc. (COH) which showed that the company paid $92.2K to provide President Reed Krakoff with a car last year. That’s on top of the $86.6K spent in 2005 and the $97.2K spent in 2004. Since most cars don’t cost that much a year — unless he’s trading them in like some women get rid of last year’s old bag — we can only assume that the expense covers the cost of a driver too. While other Coach executives also took advantage of the car benefit, Krakoff spent more on the perk that both Chairman and CEO Lew Frankfort and COO Keith Monda put together. Now let’s compare those expenses to a similar footnote in Estee Lauder’s (EL) proxy filed on Friday. The company spent a mere $13.7K providing CEO William Lauder with a car. Group President Patrick Bousquet-Chavanne spent even less — just $11.1 K.

While Coach has outperformed Estee Lauder over the past five years, the results are a bit more mixed over the past year. So what does this have to do with car expenses? Maybe nothing! But why should Coach investors shoulder the cost of the Town Car (and driver) when Estee Lauder investors are paying the equivalent of a Toyota Echo and experiencing similar returns?

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