Thursday, October 23, 2008

The Este Lauder Companies: A Family That Plays Together, Gets Paid Together



If the name is Lauder is may spell job security—and that is not a bad thing as unemployment rises above six percent. The most recent Proxy Statement for The Estée Lauder Companies, Inc. (EL-$35.38), filed with the SEC at the beginning of October 2008, provides a long list of officers and employees who are members of the Lauder Family.

More importantly the proxy filing provides a run down on their compensation. As Chairman of the Board, Leonard Lauder was paid $1.4 million in salary and $1.8 million in bonus in fiscal year 2008. Five additional family members, including Leonard’s brother, wife and nieces, were paid $2.1 million in cash and about $116,000 in stock. William Lauder, who is Leonard’s son and Chief Executive Officer, draws the biggest paycheck, receiving a total of $9.2 million in fiscal year 2008, in the form of cash salary and bonus as well as equity awards.

If those figures make it seem like the Lauder Family is on the corporate dole, consider the compensation of the other four top-paid executives at Estee Lauder. The Chief Financial Officer, Richard Kunes, and three other group and regional heads, were paid a combined $19.0 million in fiscal year 2008.

Yes, your calculator is working right. The bill for executive and brand name-related compensation was $33.6 million in fiscal year 2008. Put into perspective, that was 4.0% of FY08 operating income before compensation expenses.

While compensation for marquee-named employees may be a minor portion of profits, corporate commitments to Leonard Lauder demonstrate the lengths to which the Board of Directors is prepared to go to keep the Lauder Family scion happy.

Furthermore, Leonard’s employment contract is perpetual—if he retires he will be provided an office, a full-time executive secretary "for as long as he would like." In addition, when he retires he is entitled to his salary and compensation for six months, but if he dies while still Chairman his beneficiary is entitled to the same compensation for an entire year. Does that latter discrepancy may provide some insight into why Leonard’s next of kin are also on the pay roll?

Original new stories can also be found at BNET Energy & BNET Insight: 10-Q Detective

Reporting by contributor Debra Fiakas, who does not hold a financial interest in any stocks mentioned in this article. The 10-Q Detective has a Full Disclosure Policy.

1 comment:

doc holiday said...

Oh come on, it gets much better!

From 1995 to 2002, Warsh worked for Morgan Stanley in New York City, ultimately becoming a Vice President and Executive Director in the company's Mergers and Acquisitions Department. In 2002 Warsh married Jane Lauder, a granddaughter and heiress of Estee Lauder, who is currently General Manager of Origins, an Estee Lauder company.

>> Nice to have a connection on The FOMC!