Since the beginning of this month (July 2018), the SEC has brought two enforcement cases involving perquisites disclosure – one involving Dow Chemical, and one involving Energy XXI.  As my estimable friend Broc Romanek noted in a recent posting, over the past dozen years, the SEC has brought an average of one such case per year.  It’s not clear why the SEC is doubling down on these actions, but regardless of the reasons, it makes sense to pay attention.

The SEC’s complaint in the Dow Chemical case is an important read, as it summarizes the requirements for perquisites disclosure.  Among other things, it’s worth noting the following:

  • While SEC rules require disclosure of “perquisites and other personal benefits”, they do not define or provide any clarification as to what constitutes a “perquisite or other personal benefit.” Instead, the SEC addressed the subject in the adopting release for the current executive compensation disclosure rules, and it has also been covered in numerous speeches and other statements over the years by members of the SEC staff.
  • For those of you who prefer a principles-based approach to rulemaking, you win. Specifically, the adopting release stated as follows:

“Among the factors to be considered in determining whether an item is a perquisite or other personal benefit are the following:

  1. An item is not a perquisite or personal benefit if it is integrally and directly related to the performance of the executive’s duties.
  2. Otherwise, an item is a perquisite or personal benefit if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.”

The SEC has also noted on several occasions that if an item is not integrally and directly related to the performance of the executive’s duties, it’s still a “perk”, even if it may be provided for some business reason or for the convenience of the company.


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