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Protecting CEOs: Security Spending On the Rise

Thursday, 8 Apr 2010 | 10:41 AM ET

American corporations cut back on paying for a number personal benefits for executives in 2009, in response to the economic downturn. One benefit, however, remained a top priority: personal security for chief executives.

David Leach | Stone | Getty Images

For health insurer Wellpoint , the controversy over health reform prompted higher spending to provide increased personal security for CEO Angela Braly. In its proxy statement filing with the SEC, the company said it spent $150,000 in 2009 for additional protection measures after consulting with security experts.

"In light of growing concerns regarding the safety of Ms. Braly and her family as a result of the national health care debate, we provided Ms. Braly with additional security, including personal security during travel, a security-enhanced vehicle and in-home security."

Corporate spending on personal security for high-profile CEOs has grown at an annual rate of 31 percent over the last four years, according to executive compensation research firm Equilar. Its analysts found the mean value of personal and home security benefits for Fortune 100 chief executives more than doubled in 2008 to $65,348, up from $29,291 in 2007—a 123 percent increase. Firms were required by the SEC to report personal benefits for executives valued at over $10,000 starting with the 2007 proxy season.

Price of Protection: CEO Security
Corporate spending on CEO personal safety increased an average 30 percent annually from 2004 to 2008, with CNBC's Bertha Coombs.

Wellpoint's security disclosure is remarkable for citing the health debate as the reason behind the boost in spending, says executive compensation consultant Mark Borges of Compensia. "I think they wanted to make it clear to their shareholders that this was being done in response to a real concern and not something that they arbitrarily decided to provide as an additional benefit." he says. Borges believes security benefits for executives have risen in the past decade, as CEOs have become more visible in the public.

Braly wasn't the only Wellpoint executive targeted, according to company spokesperson Kristin Binns. "Throughout 2009, particularly as the health care reform debate gained visibility, a number of WellPoint executives received emails, phone calls and home visits that were threatening in nature. These incidents were reported to the proper authorities when they occurred. Subsequently, WellPoint implemented appropriate security measures to ensure their safety," said Binns.

The nation's largest health insurance company, Wellpoint is the parent company of Anthem Blue Cross, which has been widely criticized in recent months for high premium increases in California. The insurance provider did not return calls regarding the increased security spending for its CEO.

Of the other major health insurers which have filed proxy statements so far this spring, Cigna and Humana did not indicate any increased spending for personal security for their chief executives. "If it's not being disclosed in the proxy statement," says compensation consultant Brian Foley, the executives are likely paying for their own personal security costs. But he says disclosures vary widely.

Proxy filings from some pharmaceutical firms in recent days have noted heightened security concerns in 2009. "Animal rights groups have targeted drug manufacturers quite a bit" over the past several years says Tim Horner, managing director of corporate security firm Kroll. "Because of that at different times there might be elevated threats."

Novartis CEO Speaks Out About Arsonist Attack
Animal rights activists set on fire the Austrian vacation home of Novartis CEO Dr. Daniel Vasella on Aug. 3. Dr. Vasella discusses the arsonist attack with CNBC's Mike Huckman.

In July 2009, the vacation home of Daniel Vasella, Chairman of Swiss drug maker Novartis , was destroyed by a fire which investigators say was the result of arson. Vasella's mother's grave was also desecrated with a demand that Novartis stop animal testing. (Watch Vasella's interview with CNBC's Mike Huckman, following the attack).

While Abbott Labs CEO Miles White's overall compensation package in 2009 fell 7%, in its proxy statement the drug maker said costs associated with security for the chief executive increased 40 percent to $300,193, up from $180,467 in 2008 "on the recommendation of an independent security study."

Mylan Chairman and CEO Robert Coury's compensation for 2009 included higher costs for use of the company aircraft for personal travel, totaling more than $400,000 up from about $350,000 in 2008, "in light of heightened security concerns" according to the pharmaceutical company's 2010 proxy filing with SEC.

"With the economic downturn, if you're in a corporation that has groups who have an issue with what you've done," says Kroll's Tim Horner, "you have to look to mitigate threats against your executives."

Wall Street executives have come under intense criticism in the wake of the financial crisis. Yet, over the last year personal security benefits for some of the major banking CEOs do not appear to have been significantly higher in 2009. Residential security costs for JP Morgan CEO James Dimon are listed at $95,283, while Goldman Sachs reported incremental costs to provide security services for CEO Lloyd Blankfein last year were $51,017 in their company proxy filings with the SEC. Security experts say the banking executives have likely already had security systems in place.

Bertha will report more details about executive security spending today on "The Call" at 11am Eastern, "Power Lunch" at 1pm Eastern, and "Closing Bell" at 4pm Eastern.

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