Quotes of the Day

In a few days corporate honchos will begin arriving en masse in Junket City — this year, that’s Detroit — for the Superbowl, a championship football game that many of those seated in the luxury boxes won’t even bother to watch. Why should they? Let's be honest — this shindig is all about the parties and perks. The only scores that matter is the Scores with topless dancers and cocktails not far from Ford Field. But this year corporate card-carrying spendthrifts had better be careful. The expense-account cops are out in force — or so we’re told — and business entertaining, and perks generally, have rarely been under greater scrutiny.

You can blame some of this on General Electric legend Jack Welch, who in 2001 was given the use of a plush New York City apartment and epic amounts of other goodies upon retiring from the company — part of a hush-hush deal that came to light only after his ex-wife made it an issue in divorce proceedings. Welch later agreed to pay for his perks. But the Securities and Exchange Commission has taken a keen interest in undisclosed pay ever since, and two weeks ago proposed tough new disclosure rules. “We’ll see all kinds of stuff” revealed this spring, when annual reports get mailed, says Michelle Leder, whose blog, footnoted.org, tracks executive perks.

The first wave is already in. John Aldeborgh, a sales executive at Varian Semiconductor, got to keep his company-leased Porsche as part of an exit package approved earlier this month. Tyson Foods CEO John Tyson, who took home $4.3 million in salary and bonus last year, got another $324,472 in personal use of the company jet. Fast-food restaurant Jack in the Box spent more than $51,000 on financial planning for outgoing CEO Robert Nugent, who made $2.1 million in salary and bonus, and presumably can pay for his own investment advice. There’s been disclosures of $2,000 gift cards for directors and one sweetheart deal where a company spent millions leasing aircraft from its CEO’s privately owned firm. And as part of his effort to shake up management at Time Warner (parent company of Time.com), investor Carl Icahn has been railing of late against what he calls excessive perks at the media giant, most notably the five corporate planes used by top executives for both business and personal travel. A Time Warner spokesman notes that after the expected sale of one plane the fleet will have been cut in half from a few years ago and that any executive's private travel is disclosed and treated as compensation.

Now regulators — and internal compliance police — are looking further down the ladder. In a few cases, anyway, they are having the desired effect. “Two years ago, we sent a client a small package of nuts at Christmas and he sent it back,” says Michael Connor, executive editor of Business Ethics. The magazine no longer puts clients in the position of having to decide what’s acceptable; instead, it makes a charitable donation and sends them a card saying so.

Such shockingly careful behavior is almost certainly a backlash to the shockingly egregious instances of expense-account excess that have come to light in recent years. In one case, brokers hoping to win more business from Fidelity Investments treated one of the firm’s traders to a lavish bachelor party, including private jet travel, female companionship and, yes, dwarf tossing, not necessarily in that order. The hosts expensed it. Last year, the CEO of Savvis Communications resigned in the wake of a $241,000 charge to his corporate card during an evening with business associates at a strip club in New York.

Male-oriented business entertainment is hardly unusual, even if it isn’t always expensed. Morgan Stanley fired four employees last year after learning that they — on their own dime —had taken a client to Skin, a Phoenix strip club. Rick’s Cabaret, a publicly traded operator of upscale topless bars, estimates that 40% of its $24 million in revenue last year came from businessmen and their clients. “This is what the clients want,” says CEO Eric Langan. “A lot of deals get closed in strip clubs.”

Regulators are now probing whether that’s inappropriate business conduct (they're not sure?), and if Wall Street just might throw around too much cash chasing new business (imagine!). The probers also want to know if brokers showered with golf trips and other heaping handouts are easily seduced into arrangements which are not in the best interest of their clients. (Imagine that, too!) The answers, of course, are yes, yes, and hell yes. So the New York Stock Exchange and NASD last week proposed rules governing how bankers and traders can entertain. Yet these rules were purposely vague, encouraging something Wall Street is understandably fond of: self-enforcement. Under the new rules the Street essentially sets its own limits. Regulators, like Justice Potter Stewart's famous ruling on pornography 46 years ago, say they will know excess when they see it. Another round, boys?

Trouble is, there’s always been plenty to see, and more examples are rolling in daily — from the CEO perks disclosed in SEC filings to the corporate misdemeanors that surely will occur across Junket City this week. The truth is, no one stops it — and they never will.

• Daniel Kadlec
• Why the crackdown on corporate goodies is bound to face a swarming defense