The stock market has been the engine that has driven executive compensation upward. However, as the stock market stumbles, executives find that their stock options become underwater. They can no longer rely on them for cashing in and experiencing big paydays. You may have heard or read news reports about " off-balance sheet" transactions that have ultimately sunk some companies. Be aware of "non- publicly disclosed" compensation. Executives are stepping up hidden compensation sources to make up some of the lost income. And forget the old-style club membership dues. That is pass compared to modern perks. After being paid millions, executives apparently need the company for which they work to pay for financial advisors, luxury cars and chauffeurs, reimbursement for personal travel, access to Manhattan apartments, and more.
One method of creating stealth-wealth is through compensation agreements after the executive has left the firm. For example, when Terrence Murray, former CEO and current chairman of FleetBoston, retires, he will receive a pension payment of $5.8 million per year. In addition, he gets to use corporate jets (for him and his guests) to travel up to 150 hours per year.  Louis Gerstner retired as CEO of IBM (though he continued for a while as chairman) in March 2002. In addition to his $2 million per year pension, he has access to corporate planes, cars, and apartments for 20 years . If IBM wants a little advice from him, it has to pay him $600 per hour .  Another way to leave a firm is when another firm acquires yours. Richard Korpan was the CEO of Florida Progress Corp. until Carolina Power & Light purchased it. His severance from the firm was a lump sum of $15.8 million plus $69,070 per month. 
Probably the most publicly known CEO pension is that of the former head of General Electric, Jack Welch. The divorce filings of his estranged wife, Jane, have enabled the media to gain access to his retirement perks. He receives a $9 million per year pension. Apparently, that is not enough to live on. Welch also had GE pay for his Manhattan apartment, groceries, flowers, and even dinners at one of Manhattan's finest restaurants . He, and GE's board, received severe criticism when this news became known. Welch decided that it was best for GE shareholders if he no longer received the extra perks.  He'll have to tighten his belt and only live on the $9 million he receives each year as a pension.
Another source of perks for executives is obtaining a loan from the company they work for. It is common for executives to borrow hundreds of thousands, or even millions, of dollars at extremely low interest rates ”sometimes even interest-free. These loans may be used to purchase expensive homes or luxury items. Wells Fargo CEO Richard Kovacevich borrowed $1 million for a down payment on a house. The savings on low-interest loans can quickly add up to tens or hundreds of thousands of dollars. But the real wealth kicker is that executives frequently do not pay back the loans! Mattel Corp. absolved ousted CEO Jill Barad from repaying a $7.2 million loan and then paid her an additional $3.3 million to cover the cost of the additional taxes that would be incurred.  The new CEO, Robert Eckert, received a $5.5 million loan and will not have to repay it if he stays with the firm for two years. A similar arrangement exists with Compaq and its CEO Michael Capellas for his $5 million loan. But these loans are chump-change compared to the $343 million borrowed by WorldCom CEO Bernard Ebbers. Ebbers pays an interest rate of only 2.15 percent per year.
These extra perks and arrangements between CEOs and firms are not illegal. Indeed, the board of directors freely gave them to the executives. In such cases, the board members have simply failed to guard the shareholder assets. The structure and the incentives of board members are discussed in Chapter 6.