Corporate relocation packages tend to go to senior executives already inside the corporation, rather than new hires, a recent study shows.
The HR consulting firm Towers Perrin said it analyzed 363 proxy statements between 1998 and 2000 found that more than half of the top 50 corporate relocation packages, constituting expense amounts of $250,000 or more, went to current senior executives.
"The general assumption has been that the largest relocation packages are negotiated at the outset of the business relationship, when the negotiation leverage over the size of pay and benefits is thought to be greatest," Towers Perrin consultant Ted Jarvis said. "Yet the actual finding shows that only slightly less than half of the top relocation packages go to new hires. That's something of a surprise."
"This study provides evidence of two important facts of corporate life," Jarvis said. "First, even senior executives in the highest echelons in their organizations are from time to time asked to relocate. Second, relocation payments can represent significant additional executive compensation value, regardless of whether such payments are made to either retain or attract top executive talent."
The average cost of the top 50 corporate relocation packages in the study was $452,168 while the average cost of all of the 363 relocation packages measured in the study was $128,663.
A significant proportion of the largest relocation packages are for moves to some of the most expensive geographic markets in the world, including the New York City metropolitan area, the San Francisco Bay area, London, and Hong Kong.
Tax gross-ups can often comprise 40 percent to 60 percent of a relocation package and are estimated to comprise 30 percent to 50 percent of the aggregate value of the executive relocation packages in the sample.
The data revealed no industry concentration among the largest relocation package grantees. In addition, the size of the packages did not appear to correlate to the revenue size of the company.
Not surprisingly, the packages for the highest-level corporate executives, including CEOs, COOs, presidents, board chairs and vice chairs, comprise a disproportionately high number of the largest relocation packages.
Four of the top 50 relocation packages were part of severance agreements given to departing senior executives from a single company, where loans previously made to them were forgiven as part of their agreements.
Forgiveness of debt incurred for purchasing a new home often applies in the event of severance following relocation, when the loans typically are interest-free.
Even with those receiving severance packages factored out of the top 50, the number of top packages that went to insiders exceeded those going to new hires by a margin of 52 percent to 48 percent.
Information on relocation costs is typically included in corporate proxy statements under "All Other Compensation" in the Summary Compensation Table and associated footnotes. Additional details may be disclosed in discussions of the employment contracts.
All expenses connected with a given relocation may not necessarily be lumped into a single year's disclosure, with "add-on" expenses sometimes noted in subsequent years.
