|
 |
|||||||
|
|
|
|
|||||||||||||||||
|
|||||||||||||||||||
|
|
||
|
Feature Corporate officers today face a daunting array of threats. What’s a concerned and responsible board of directors to do? By James B. Mintz, James H. Rowe, and Michael Anthony What can boards of directors do to help protect senior executives who, more often than not, are as much an asset to a corporation as its key products, brands, and technologies? What can -- and should -- it cost not to insure, but to ensure, a senior executive’s physical safety? These are among the topics being discussed by security professionals the world over. Executive protection, properly understood and properly practiced, isn’t simple, or cheap. Once upon a time, it might have meant nothing more than hiring a bodyguard -- an ex-cop or retired FBI agent burly and intimidating enough to clear a path through a crowd of rowdy protesters or irate shareholders. Special skills required? At most, some familiarity with evasive driving, a mean karate chop, and perhaps the ability to shoot -- and license to pack -- a gun. Today, though, corporate executives face a daunting array of threats beyond the ever-present danger of kidnap for ransom. In our gun-happy society, there is always the risk that yesterday’s disgruntled employee may morph into today’s deranged killer. Executives are sometimes viewed as symbols, and symbols can attract the attention of a variety of loonies. And, of course, there is the now-ever-present threat of terrorist attack, which can range from the mass horror of Sept. 11 to the individual tragedy of a victim grabbed, displayed in propaganda videotapes, and murdered while the camera rolls. Levels of protection Seven years ago, a Wall Street Journal article on executive protection reported that an estimated 25 CEOs were then getting round-the-clock protection, at a cost to their companies of up to half a million dollars a year. The number of executives getting that level of executive protection today is considerably higher -- and the number getting some level of executive protection, some of the time, is probably close to 90 percent. No doubt for security reasons, proxy statements only rarely discuss executive protection arrangements, but those that do are probably representative as to the need and cost. General Electric’s 2004 proxy disclosed that “GE, pursuant to an executive security program established by the management development and compensation committee of the board of directors, requires the current chairman and vice chairmen to use company aircraft for personal as well as business travel. The committee requires the company to provide these security services for the company’s benefit rather than as a personal benefit or perquisite for the executives.” (Translation: The protected executive does not have to declare the cost of the protection as taxable income.) Similarly, according to Disney’s 2005 proxy, because of “business-related security concerns,” CEO Michael Eisner is required to use company aircraft for non-business as well as business travel. In addition, the proxy continues, Eisner and President Robert Iger “are provided with security systems and equipment for their residences and/or automobiles and with security advice and personal protection services at their residences and on other appropriate occasions. The costs of these systems and services are incurred as a result of business-related concerns and are not maintained as perquisites or otherwise for the personal benefit of Messrs. Eisner and Iger.” And the cost? In fiscal year 2004, to protect Eisner, Disney spent $18,663 on “security systems and equipment” and $716,335 on “security advice and personal protection services.” That was down, the proxy reports, from the figure in 2003, when -- perhaps because 9/11 was fresher in everyone’s mind, or because some hardware costs had already been incurred -- the corresponding figures were $28,483 and $808,965, respectively. What does all that money go for? Broad Range of Skills In the first instance, it’s for the services of one or more executive protection specialists -- a/k/a bodyguards -- whose services can run anywhere from $300 to $1,200 or more per head per day. If special skills are required, such as fluency in a foreign language, familiarity with a foreign country or city, or a black belt in martial arts or a gun permit, that cost could easily double. But the warm body is only the beginning. Executive protection today involves a broad range of skills, including the assessment of possible threats; the gathering of intelligence; the detailed advance planning of every trip from across town to around the world (including, in particular, how best to get from point A to point B, and the nearest hospital at every step along the way); emergency first-aid skills to keep the subject alive until medical help arrives; and, for all of these, the associated staff resources and technical support. Add to all this the cost of private and secure air and ground-based transportation, and it’s not hard to see why the cost can easily approach a million dollars per protected executive, year in and year out. Is the benefit worth the cost? That’s a question that doesn’t lend itself to a black-and- white answer. A Kind of Insurance One way to look at executive protection is as a kind of insurance. The odds are that any given company’s senior executive or executives won’t be targeted or attacked. For them, every dollar spent on executive protection is “wasted.” But since no executive or corporate board knows if that particular executive will be one of the unlucky few, isn’t providing an appropriate level of executive protection the prudent and responsible thing to do? If, God forbid, something were to happen to a senior executive not provided with executive protection -- because he or she preferred not to endure the associated and inevitable loss of privacy and freedom of movement, or the board didn’t insist on it -- and the company’s business or stock price then fell off a cliff, could it be argued that the board had failed to perform its fiduciary duty? We’re not aware that this has ever happened, but in our litigious society, it’s not hard to imagine that it could. Then, too, there is the peace of mind factor to consider. An executive who, consciously or unconsciously, is refraining from travel to distant corporate outposts, visiting existing or prospective business partners, or attending other important meetings far from headquarters is arguably not doing his job. And an executive worrying about the risks facing him and members of his team or family traveling with him while engaged in such outings will clearly be less than 100 percent focused on the business at hand. Eternal Vigilance Unfortunately, we live in a dangerous world. No risk of any kind can be completely and permanently eliminated. But nearly every kind of risk can and should be managed, and minimized. We’ve all heard the well-known tag, sometimes (albeit erroneously) attributed to Thomas Jefferson, that goes “Eternal vigilance is the price of liberty.” The corporate equivalent of that famous phrase might be “Eternal vigilance is the price of executive safety, peace of mind, and, ultimately, shareholder value.” In today’s world, a well-funded, staffed, and managed executive protection program should be regarded by boards of directors as a cost of doing business -- a regrettable necessity, perhaps, but even more regrettable if it’s not there when it’s needed. |
||
| James
B. Mintz is president, James H. Rowe is executive vice president, and
Michael Anthony is a principal and senior vice president of James Mintz
Group Inc., http://www.mintzgroup.com.
The firm provides investigative services to boards, corporate counsel,
and their outside legal and financial advisers. Mintz, who helped
pioneer the use of sophisticated investigative resources by law firms
in the late 1970s, founded the firm in 1994. Rowe heads the firm’s
Washington, D.C., office, and Anthony heads its Chicago office. A
longer version of their article appeared in the Third Quarter 2005
edition of Directors & Boards.
The authors can be contacted at jmintz@mintzgroup.com,
jrowe@mintzgroup.com,
and manthony@mintzgroup.com. Copyright © 2005 Directors & Boards, P.O. Box 41966 Philadelphia, PA 19101-1966. All rights reserved. Contact the webmaster. < Privacy Notice > |
|||
