Question

Why are executive perquisites provided? Support your opinion.

How much is too much? Justify your opinion.

What do shareholders think about executive "perks"? Why?

What perquisites should be provided to BBE executives and why?

Answer 1

U.S. perspective

A chief executive officer, like other officers and somewhat like directors, has a fiduciary obligation to act in the best interests of the corporation and its shareholders. This is each officer’s fundamental obligation.

The CEO reports to the corporation’s board of directors. The CEO’s powers and responsibilities are specified by the board and by the corporation’s bylaws. In exercising those powers and carrying out those responsibilities, the CEO must satisfy the fiduciary obligation described above.

Other executives presumably report to the CEO. Managing those executives comes under the CEO’s powers and responsibilities discussed above.

In summary, powers and responsibilities are not balanced so much as they are exercised and carried out consistent with the CEO’s fiduciary obligation.

What perquisites should be provided to BBE executives and why? - -

A perquisite is essentially a benefit that is offered by employers to employees as a result of their job position, and in addition to cash salary or wages.

A perquisite as defined in the Section 17(2) of the Income-tax Act includes the following points:
(i) the value of rent-free accommodation provided to the assessee by his employer;
(ii) the value of any concession in the matter of rent 13 respecting any accommodation provided to the assessee by his employer;
(iii) any sum paid by the employer in respect of any obligation which, but for such payment, would have been payable by the assessee;
(iv) any sum payable by the employer, whether directly or through a fund, other than a recognised provident fund or an approved superannuation fund[or a Deposit-linked Insurance Fund established under section 3G of the Coal Mines Provident Fund and Miscellaneous Provisions Act, 1948 (46 of 1948), or, as the case may be, section 6C of the Employees' Provident Funds and Miscellaneous Provisions Act, 1952 (19 of 1952)], to effect an assurance on the life of the assessee or to effect a contract for an annuity;
(v) the value of any specified security or sweat equity shares allotted or transferred, directly or indirectly, by the employer, or former employer, free of cost or at concessional rate to the assessee
(vi) the amount of any contribution to an approved superannuation fund by the employer in respect of the assessee, to the extent it exceeds one lakh rupees;
(vii) the value of any other fringe benefit or amenity as may be prescribed