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?
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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.