Mark Hurd’s very full plate…
Please see a correction to this post based on an error by HP.
Late yesterday, Hewlett-Packard (HPQ) released its proxy. First, there’s the numbers on CEO Mark Hurd’s pay, which have been well-reported, but which illustrate just how screwed up the compensation disclosure rule really is. Reuters reports Hurd’s total comp at $42 million; the AP has it at $34 million and the board’s own calculations — called the committee’s view in the proxy — have it at $23.3 million. Sounds like something for Mary Schapiro’s to-do list once she is confirmed.
Still, we were much more fascinated by the tax-gross up chart on pg. 47, which showed that Hurd received “an other gross up” of $79,814, and the equally delicious footnote which explained that that money “represents amounts reimbursed to the NEOs for taxes on meals associated with business travel undertaken by the NEOs in connection with events to which family members were invited.”
Now, calculating an expense from a gross-up is a bit of an inexact science since we can only guess at Hurd’s tax rate. And, presumably those meals were eaten in different places where the local tax rate varies, which further complicates the calculation. Still, the experts that I’ve consulted with say a conservative estimate would be around $160K in food for Hurd’s family and that it’s probably significantly higher than that. Any footnoted readers care to come up with a better calculation?
UPDATE: We’ve done a bit more back-of-the envelope math based on the disclosure for Hurd’s airplane gross-up and are coming up with roughly $243K in food, which as one sage footnoted reader jokes, “that’s a lot of black and white cookies!”
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Posted in Tags: gross up, proxy |
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January 21st, 2009 at 11:31 am
Gosh! That’s $13,000 a month just for a few business events! Just how big is his family and where are they eating? Maybe he was treating the other NEOs and their families, too?
January 21st, 2009 at 1:19 pm
They must be eating gold-encrusted beef tenderloin, washing it all down with those martinis with a diamond on the bottom.
I wonder if Mr Hurd (or someone in his family) can explain why my recently purchased HP laptop is such a dog…
January 21st, 2009 at 8:04 pm
First thing the SEC needs to do is strengthen the plain English rules and force companies to cut down on the acronyms.
For the footnoted team acronyms are second nature, but it took me a minute to decode NEO. It is not “near earth object” here. Then my brain cycled through the thought that Keanu Reeves had assumed the CEO post at HP, but this was dismissed quickly. Finally dawned on me that it means “Named Executive Officer”. I could still be wrong, but it sounds like it fits here.
As to tax gross ups, they should be abolished. The IRS could do this quickly by taxing them, which would create an semi-asymptote by taxing the gross up payment, creating a new gross up to pay the tax on the first gross up, which triggers another tax payment…..on and on until the gross up payment declines to one penny.
Lastly, if there is a business reason for spouse or other family to be there, then there should be no tax owed. IF there is no business reason then they should not be there.
Can’t everyone just pay their own taxes?
January 23rd, 2009 at 2:13 am
What is an NEO?
January 23rd, 2009 at 9:40 am
@ Steve Lake: An NEO is a named executive officer — one of the five top executives whose salary, benefits, perks, etc…are required to be disclosed under SEC rules.
February 23rd, 2009 at 1:37 pm
We need to get rid of this extensively high pay of CEO or NEO. Sure they are in the top ladder , but without the employees below…………there is no company. Need to do this backwards….
this quote is so appropriate today—the rich have no idea of the struggle of the middle class and worse yet the poor, ” If there is no bread , feed them cake…”