A USA TODAY analysis of corporate proxies found scores paying for travel, lodging and meals for business-related events, corporate junkets, even attendance at last summer's Olympics in London. In some cases, companies even covered executives' taxes on spousal travel reimbursements because it was considered income.
Perks ranging from country club memberships to personal use of corporate aircraft have long been part of executive compensation packages, partly under the corporate mantra that they're needed to attract and retain leaders and partly due to the fact that compensation consultants often benchmark offerings at one company, making it easier for others to follow suit.
Companies, through proxy statements and spokespeople, say covering spousal travel costs fosters better relationships among directors, execs and employees. But corporate governance experts say spousal travel benefits for well-compensated execs and part-time directors cross the line.
"You have to wonder why companies are paying for stuff like this,'' says Michelle Leder of proxy-tracker Footnoted.org. "It's not as if any of these people are surviving on minimum wage or have taken a vow of poverty."
An Olympic outlay
Last summer's Olympics in London was a company-paid destination for several spouses of execs and directors.
Foot Locker reimbursed CEO Ken Hicks — who received $10.5 million in 2012 compensation and gained $12.9 million from vested shares — more than $8,000 for his wife's Olympics trip. Visa provided board member Robert Matschullatover $30,000 in spousal travel and director John Swainson nearly $13,000. That's on top of over $300,000 each in board compensation.
Cisco Systems provided director Michael Capellas over $20,000 to cover spousal expenses and taxes for two trips, including one to the Olympics. Capellas received $295,000 for board service last year, and as head of the company's joint venture with EMC until last November, received over $2 million more in pay and incentives.
General Electric paid for Olympics' trips for more than a dozen board members and executives. In SEC filings, GE lumps spousal travel costs with other perks, including discounted GE products, car service, home security and medical exams for senior execs. For directors, spousal travel is combined with discounted products. The company says the value of individual spousal travel payouts, described as "certain expenses" in its proxy, was less than $25,000. GE spokesman Sebastien Duchamp declined to comment.
Among other examples, General Mills forked out over $34,000 in spousal travel costs for CEO Ken Powell and about $32,000 in spousal travel and tax reimbursements for COO Ian Friendly, mostly for a Dubai meeting of Cereal Partners Worldwide, General Mills' joint venture with Swiss food giant Nestle. "Spousal attendance was encouraged,'' says General Mills spokeswoman Kirstie Foster. Powell's 2012 compensation: $8.6 million, plus $7 million from exercising previously awarded stock options and vested shares. Friendly received about $2.7 million in 2012 compensation and gained $7.5 million from vested shares and exercised stock options.
Pork processor Smithfield Foods covered over $10,000 in travel expenses for CEO C. Larry Pope's wife. That's on top of $75,000 for Pope's personal use of corporate aircraft, $35,000 for a company car, $102,000 in charitable matching contributions and compensation valued at over $8 million. Pope also gained $6.2 million from vested shares and will make at least $22 million in retention bonuses and accelerated vesting of company stock following Smithfield's $7.1 billion buyout by China's Shuanghui International. Smithfield did not respond for comment.
Haliburton valued 2012 spousal travel costs for CEO David Lesar at $34,000 — plus $19,500 in taxes the company covered for imputed income related to spousal travel. That's on top of the $343,000 the oil services giant says Lesar received for personal use of corporate aircraft. Lesar's 2012 compensation: over $17 million, plus a $13.6 million from vested shares.
Ventas, a Real Estate Investment Trust, covered nearly $58,000 in spousal travel and entertainment benefits for CEO Debra Cafaro. Her 2012 compensation: $11 million, plus $11.3 million from vested shares and exercising previously awarded stock options.
Fostering closer ties
Corporate policies are as varied as the companies offering them. Dell says it pays for "reasonable" spousal travel expenses if it requests spouses' attendance at company-sponsored events. Visa says such perks facilitate management performance.
Chevron, which covered up to $20,000 for directors' spousal travel costs to Southeast Asia last October, says the benefit helps foster "social interaction among directors as well as provide opportunities for spouses to attend receptions with local and expatriate employees," according to its proxy. Chevron directors receive annual retainers worth $300,000.
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Industrial parts maker Parker Hannifin says spousal travel reimbursement helps "encourage executive officers to spend an appropriate amount of time with their direct reports in locations away from corporate headquarters, to allow executive officers and their spouses to develop a more personal relationship with the executive officers' subordinates and their families, and to encourage spouses to attend retirement parties, funerals, business dinners and other corporate functions at locations away from their homes."
Other companies say spousal travel reimbursements promote chummier relationships.
Baxter International reimburses travel and entertainment expenses of "significant others of directors" because board members believe it helps "to create a sense of collegiality" and helps "in fulfilling their responsibilties,'' according to the company's latest proxy. Among Baxter's 13 directors, 11 have been on the board at least six years.
The rationale is similar at ConocoPhillips, which reimburses directors and execs for spousal and guest travel to functions such as retirement parties. "The board believes that such costs are expenses of creating a collegial environment that enhances the effectiveness of the board," according the the company's proxy. (Half the board's 10 directors are new since 2010.)
ConocoPhillips director Mohd Marican received more than $61,000 for guest-related travel and taxes covering travel costs in 2012. He and other board members received annual retainers worth $285,000.
ConcocoPhillips also picked up spousal and guest-related travel taxes valued at nearly $31,500 for outgoing CEO James Mulva, who received nearly $12 million in compensation after retiring six months into 2012. The company also provided Mulva with $22,260 to cover taxes for the value of his retirement gifts. That's on top of a $68.4 million pension payout, $67.3 million gains exercising previously awarded stock options and another $64.8 million from vested shares.
Exact sums elusive
At many companies, it's virtually impossible to determine what is spent on spousal travel. GE, Target, BMC Software, leisure products marketer WMS Industries and Parker Hannifin, among others, lump spousal travel costs with other executive perks. Furniture maker Herman Miller's execs cover spousal travel costs under a "bundled benefits" plan worth up to $36,000 a year that can also be used for cellphone fees, club dues and commuting.
About 20% of Fortune 500 companies surveyed by compensation consultant Towers Watson provide spousal travel perks. But considering many execs are allowed personal use of the corporate aircraft or are required to fly corporate planes even when not on company business, spousal travel costs may be under-reported.
"There is some ambivalence and confusion on how companies are reporting this,'' says Robert Newbury, Towers Watson's director of executive compensation resources.
One thing's for sure: spousal travel reimbursements — unlike other perks that have been stripped away from many executives in an era of increasing shareholder activism and anger at excessive compensation — are not fading away. That 20% number cited by Towers Watson is virtually unchanged since 2008, Newbury says.
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Yet while some companies say they need to maintain spousal travel perks to keep them competitive with other firms, not all agree.
After reviewing its executive perk and benefits plan, Applied Industrial Technologies ended spousal travel pay and related taxes as well as reimbursing employees for child-care costs while they were on business trips. The manufacturing supplier says such perks are no longer warranted to attract and retain "superior employees for key positions."
AIT also jettisoned other perks commonly provided to senior execs, including car allowances, club memberships and financial planning.
Corporate governance experts such as Paul Hodgson approve such moves.
"Bottom line, this isn't a lot of money,'' Hodgson says. "But it's not needed."