Dow Chemical has agreed to pay $1.75 million to settle charges that it failed to properly disclose around $3 million in perks for former CEO Andrew Liveris in its proxy statements.
The Securities and Exchange Commission said Dow applied an incorrect standard in deciding not to disclose perks including personal vacations Liveris took with family using company aircraft and dues Dow paid to a charity he chaired.
“From 2011 through 2015, and in proxy statements reporting on those years, Dow did not ensure that approximately $3 million in executive perquisites were adequately evaluated and disclosed as ‘other compensation’ in the Compensation Discussion & Analysis (“CD&A”) section of the annual proxy statements. These authorized but undisclosed perquisites included personal use of the Dow aircraft and other expenses. Although Dow applied procedures regarding the evaluation and disclosure of its executives’ perquisites, Dow did not follow the Commission’s standard regarding disclosure of perquisites,” the SEC said in an administrative proceeding. “Instead, Dow incorrectly applied a standard whereby a business purpose related to the executive’s job was sufficient to determine that a benefit would not be a perquisite that required disclosure.”
Under an SEC rule, even if an expense has a business purpose, it must still be reported as a perk if it is not “integrally and directly related to the performance of the executive’s duties.”
It’s not the first time that the SEC has pursued a company for improper disclosure of executive perks. In May of 2017, it fined marketing company MDC Partners for failing to disclose benefits and perks of its former chairman and CEO Miles Nadal. According to the SEC’s order, “shareholders were informed in annual filings that Miles S. Nadal received an annual perquisite allowance of $500,000 in addition to other benefits as the chairman and CEO of MDC Partners. But the SEC’s investigation found that without disclosing information to investors as required, MDC Partners paid for Nadal’s personal use of private airplanes as well as charitable donations in his name, yacht and sports car expenses, cosmetic surgery, and a wide range of other perks. All total, Nadal improperly obtained an additional $11.285 million in perks beyond his disclosed benefits and $500,000 annual allowances.”
Nadal resigned from the company and returned $11.285 million to the company. MDC was forced to pay a fine of $1.5 million for its role in the disclosure failure. 