Puffed-up perks at Krispy Kreme…

May 9, 2011

Anyone but the most trusting investor recognizes that Securities and Exchange Commission filings contain more than a little puffery and marketing folderol, especially when it comes to executive pay and benefits. Some companies, though, seem to go the extra mile.

So it is with Krispy Kreme Doughnuts (KKD), a perennial favorite around here for both its glazed confections and its sickly sweet compensation practices. (For a couple of Krispy Kreme’s greatest filings hits, check out our February 7 post, and this one from last spring.)

Krsipy Kreme caught our attention yet again with the proxy it filed Thursday, thanks to its decision to once again give Chief Executive James H. Morgan “a modest ‘executive allowance’ at the rate of $2,000 per month.” Never mind that this stretches the meaning of “modest” beyond all recognition — it’s almost half the median family income in Krispy Kreme’s home state of North Carolina, according to this Census Bureau spreadsheet. More to the point, we’re always baffled by a company’s decision to provide executives an “allowance” for unspecified perks and other goodies.

Where we come from, that’s what “salary” is for: money to spend on things you buy yourself, from food to fitness-club memberships. And needless to say, Morgan gets a nice one, at $665,000 last year. It’s conceivable that companies have reasons to provide other perks, if there’s something they want executives to have but have decided not to ask the executive to pay for — the ubiquitous personal company-jet travel for “safety” and “efficiency,” for example, or tax planning so the executive isn’t spending too much time fiddling with his 1040 on April 14. However dubious the reasoning, there’s at least an argument behind it. But here’s Krispy Kreme’s argument for a perk allowance:

“Mr. Morgan’s executive allowance is in lieu of perquisites and other personal benefits typically afforded to Chief Executive Officers at other public companies, such as company-provided cars, annual physical examinations, and financial planning services. The Compensation Committee feels that the provision of an executive allowance permits the Company to attract and retain key talent in the Chief Executive Officer position while at the same time controlling costs.”

Given that Morgan’s $24,000 “executive allowance” works out to about 1.7% of Morgan’s total cash compensation — he made $1.95 million last year, all but 516,300 in cash — we have serious doubts that it does much to “attract and retain” him. His 1% stake in the company’s shares probably does more on that front.

Besides, if the company just paid him $689,000 in salary instead of $665,000, would anyone notice? Chances seem pretty good even Morgan wouldn’t.

Image source: House of Sims— via Flickr.

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Over at FootnotedPro, we’re batting .300 with the recent news that Lawson Software (LWSN) is being acquired in a $2 billion deal. Of the companies in our January 14 report on top M&A targets for 2011, two others have also announced deals: Smurfit-Stone Container (SSCC) and Pride International (PDE). FootnotedPro: Interesting. Actionable. Profitable.

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