Super Bowl tickets plus a tax gross-up? Pretty gross
n nearly 20 years of reading SEC filings, I came across a disclosure for the very first time last Friday: DraftKings Inc. (ticker: DKNG) paid over $130K for its CEO, Jason Robins and an unspecified number of family members to go to the Super Bowl last year in my (adopted) hometown: Los Angeles.
This was disclosed about halfway through the proxy that DraftKings filed at 4:30 EST last Friday in a “footnote to a footnote” tied to the summary compensation table. Although DraftKings went public via a SPAC deal in June 2020, this was the company’s first proxy filing, so it’s hard to know whether this was a new perk, or something that Robins has had in the past.
When I first spotted this last Friday, I was pretty amazed. While DraftKings hasn’t done as poorly as other SPACS, it’s far from a SPAC-success story. As I looked into this a bit more, I realized it wasn’t just the Super Bowl tickets, although that seems like a lot of money to spend on a single game, given the prevailing prices at the time, it was the fact that the company gave Robins a tax gross-up to cover the tax bill on the tickets. That little detail was in a “footnote to a footnote to a footnote” in subsection iii, where the company disclosed this:
tax reimbursements received by Mr. Robins in connection with the benefits and perquisites included in the “Super Bowl Expenses”
It’s not clear how much the tax gross-up was for, because it’s bundled in with other tax gross-ups unrelated to the game. But it still comes across as pretty gross, even if Robins technically doesn’t take any salary or bonus.
A lot of companies have been moving away from outrageous perks like this and even more have been moving away from gross-ups. Back when I was first starting out, it was pretty common when I was first starting out to bequeath crazy perks on CEOs — does any one still remember how GE covered Jack Welch’s dry cleaning bill and fresh flowers?
I suppose there’s something of an argument that Super Bowl tickets for the CEO of DraftKings is business-related. But if it was truly deemed business-related, it would be considered a business expense and buried somewhere in marketing expenses, as opposed to being disclosed. So I guess that’s kudos to DraftKing’s attorneys for disclosing this detail at all.
Using Sentieo/AlphaSense, I did a search for other companies that disclosed similar expenses in their proxy statements and came up empty-handed. There were quite a few disclosures about ticket purchases, but most of those were for a fraction of the amount that DraftKings disclosed. VividSeats (ticker: SEAT) disclosed spending $140K to sponsor a Rolling Stone party at the same Super Bowl, according to its proxy last year. But that wasn’t exclusively for the CEO and does seem more like a marketing expense.
The bottom line is that providing this kind of perk to an executive who should be able to afford this comes across as tone death, to say the least.