It’s been a couple of years since we’ve seen an SEC Enforcement Action related to improper disclosure of perks, but the SEC recently settled a case. In this most recent case against Argo Group International Holdings, the SEC’s press release says the company failed to disclose over $5.3 million that it paid in connection to perks for the company’s then CEO. Here’s an excerpt:
The SEC’s order finds that in its proxy statements for 2014 through 2018, Argo disclosed that it had provided a total of approximately $1.2 million in perquisites and personal benefits, chiefly retirement and financial planning benefits, to its then CEO. According to the order, Argo failed to disclose over $5.3 million it had paid on the CEO’s behalf, including in filings for 2018 after a shareholder issued a press release alleging undisclosed perks to the CEO. The order finds that the perks Argo paid for, but did not disclose, included personal use of corporate aircraft, helicopter trips and other personal travel, housing costs, transportation for family members, personal services, club memberships, and tickets and transportation to entertainment events. The order finds that, as a result, Argo understated perks and personal benefits paid to the CEO over this period by more than $1 million per year, or 400%.
The SEC’s order provides more color about the company’s disclosure issues, which sound like in large part stemmed from failure to maintain internal accounting controls. The company settled the action without admitting or denying the SEC’s findings, and it will pay a $900,000 civil penalty. Based on information in the SEC’s order, the company took quite a few remedial actions that likely didn’t come cheap while also leading to quite a bit of upheaval at the company.
To help guard against this type of action, Lynn, Borges & Romank’s “Executive Compensation Disclosure Treatise” has a 97-page chapter on Perks & Other Personal Benefits.
-Lynn Jokela, TheCorporateCounsel.net June 8, 2020
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