More on Welch: Disclosure rules do not serve shareholders well
The $2.5 million that Mr. Welch estimated he would pay annually may be far less than the actual cost to G.E. to provide those services because of government rules on how to value perks. For example, under federal rules, it would cost an executive less than $500 to take a corporate jet from New York to Paris on vacation, but the flight would actually cost shareholders at least $15,000.
And there may never be any disclosure to shareholders of just what these perks cost because S.E.C. disclosure rules do not apply to retired chief executives...John Coffee, a securities law expert at Columbia University, said the Welch case illustrated how an S.E.C. rule limiting disclosure of executive perks to "incremental cost" — how much extra a company pays for a given benefit — had been stretched "by very sharp corporate lawyers who have taken a small exception and turned it into a huge loophole."
He said many companies were using the "incremental cost" rule to hide the true cost of perks. "If the C.E.O. has a masseuse, they will tell you the person was on the staff anyway so there was no incremental cost," Mr. Coffee said.
Mr. Coffee said Mr. Welch's perks show how even when there is no hint of fraud, the disclosure rules do not serve shareholders well.