By Michelle Lamb, Research Associate
Ever seen a compensation table that had to be flipped on its side because, with so many itemized payouts, it otherwise wouldn’t fit on the page?
Check out this one displaying the “All Other Compensation” payouts at PartnerRe. Now, to be fair, the disclosure level should be applauded here – we see what looks like every “other” cost, down to those only costing a thousand dollars. But, and that’s a large but, many of the types of expenses we’re seeing here – Housing, Bermuda payroll tax reimbursement, Personal use of corporate jet, Relocation/shipping expenses, even Children’s education costs – seem related to the company’s being located in Bermuda. Shareholders may enjoy the avoidance of tax, but these disclosures show us this doesn’t come without other costs.
Also, we have long considered the existence of certain perks, like personal use of the corporate jet, to be red flags from a corporate governance perspective. One of the assessments underpinning our compensation ratings is and always has been excessive perks. While the numbers may be small, their significance is large since they can often be seen to be a pointer to wider compensation policies – that may lead to excessive pay without performance – and other governance policing policies which may be weaker in this kind of environment.
As disclosed in the same proxy, “PartnerRe’s primary business is to assume risk; we increase shareholder value by ensuring that our executives and employees have the skills to assess value and manage risk appropriately, consistent with the long-term goals of PartnerRe. Our compensation policies emphasize, and are designed to reward, these skills.” Shareholders should urge the compensation committee to consider governance risk as well next time they are negotiating an executive pay package.