Thursday, August 24, 2006
House Prices Don't Fall For Pampered CEOs
Corporate executives worship "The Market" with all the feverish double-mindedness of Victorian hypocrites. While they unceasingly invoke this fierce deity to justify everything from layoffs to wage suppression, they routinely escape its wrath by enriching themselves with stock options, through which they may buy low and sell high anytime they want, irrespective of the true market value of the stocks in question. Now they have acquired another perk that allows them to cheat on their own god.
Several companies have recently disclosed in their SEC filings that they are "protecting their executives from real estate market forces". What this means in practice is that they are either compensating executives on the shortfall from their obscenely overpriced homes - or actually buying the homes themselves.
For example, eBay has provided a generous "relocation allowance" to Bob Swan, its new CFO, to enable him to sell his $3.3 million house in Plano, Texas and move to California without suffering any loss due to plunging real estate values. Two months ago, his house was listed at $2.7 million - $600,000 less than what he paid for it in 2002. But - not to fear, eBay says that if Bob's house goes for less than $3 million they will pay him the difference up to as much as $700,000. I wonder if they do that for the average Java coding shill or web content coolie joining The eBay Team.
Similarly, when Nike's ex-CEO Bill Perez put his $3.1 million Portland house up for sale, Nike bought it themselves. Not only that, but they reimbursed Perez for $578,000 in renovations, which included three plasma TV screens, various rare antiques, and a wine cellar with a capacity for 2,000 bottles. That's a lot of "bottles of beer in the wall" for Bill and his wife and kids to sing about as they make their cross-country drive to their next change of address. Presumably in their Rolls-Royce SUV... The newly refurbished old manse is now on the market for $3.99 million. Not an inconsiderable leap in value, if I do say so myself. I have heard of real estate agents advising home-sellers to install new carpeting or fix the garage to get their house ready for the market, but I've never heard of anybody getting their employer to plunk down the cost of the sprucing up.
Check out the article by Michelle Leder at the link below. God bless our sister in indignation.
The CEO Real Estate Scam: The new infuriating perk for corporate executives" from Slate