TE Connectivity pays big for German gig…

The dollar has waxed and waned against the Euro over the past couple of years, with one Euro currently costing about $1.34 in U. S. dollars. That generally being the case, we’re used to seeing companies shell out a lot of money for executives who live abroad. However, the PRE 14A that TE Connectivity Ltd. (TEL) filed December 8 disclosed that it’s paying more than a million dollars a year for perks and incidental expenses on behalf of one top executive who is stationed in Germany.

The globe-trotting executive in question is Joseph B. Donahue, who worked his way up the ranks at TE Connectivity (formerly known as Tyco Electronics Ltd.) during the past decade. He has been serving as its Executive Vice President and Chief Operating Officer since May 2011, and as its President, Transportation Solutions since August 2010.

In fiscal year 2011, the company spent more than $1.01 million on Donahue’s behalf for a category known as “All Other Compensation.” Drilling into the footnotes, we learned that TE Connectivity labeled nearly $871,000 of that money as “Perquisites,” a category that comes with some explanation, as well as its very own footnotes (which explain that the company paid for Donahue to live in Germany under its expatriate policy).

The proxy goes on to explain that TE Connectivity spent $58,336 – or nearly $5,000 per month – for Donahue’s rent in Germany, plus $25,350 for a company car, and another $43,947 as an allowance for goods and services. It spent another $90,926 on expenses which aren’t itemized in detail because they don’t individually exceed $25,000 per expense; but those categories include home leave costs, dependent education tuition, housing management fees, tax preparation services, utility allowance, storage costs and repatriation costs.

Yet those expenses collectively add up to a bit under $220,000, or roughly 38% of Donahue’s FY 2011 base salary of $569,362. His FY 2011 total compensation package, including his bonus, stock awards, stock options, and the increased value of his pension plan, added up to more than $4.01 million.

TE Connectivity spent most of the money on Donahue’s behalf to pay foreign taxes of nearly $480,000. But it also paid a gross-up payment of $141,973 for taxes that Donahue otherwise would have owed on the perks that he got in calendar year 2010. That’s not a typo: The filing explains that “…gross-up amounts for calendar 2011 are not determined until the end of calendar year 2011.” The remainder of the million-dollar “Other” category largely comes from TE Connectivity paying $112,898 in contributions to Donahue’s qualified and non-qualified defined contribution plans.

Expatriate work gigs in Europe always seem like plum assignments to us, especially when the company picks up the tab for everyday expenses that the rest of us have to pay – taxes, cars, and “goods and services” – to name but a few. But presumably whatever Donahue is doing for the company in Germany is critical to the company’s bottom line and shareholders are getting their money’s worth. From the outside looking in, one has to believe that Donahue himself is, for as long as he remains in Germany.

Image source: The view at Kaiserburg Castle, Nurnberg, Germany, via Shutterstock


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