As many CEO perks vanish, the 'executive physical' remains to remedy investors' worries

Most CEOs no longer see many lofty perks that companies once offered, including country club memberships and company cars. Despite the dwindling of these exorbitant benefits, one extra service remains for many top officials, according to The Washington Post: the executive physical.

When the Securities and Exchange Commission began requiring companies to disclose more details on executive compensation in 2006, perks came under increased scrutiny. Combined with pressure from investors, many of these extras quietly faded away.

However, the executive physical has persisted and even become more common. These check-ups allow executives to visit a range of physicians and have several tests performed at once in either prestigious medical centers like Rochester, Minn.-based Mayo Clinic or lavish resorts like Canyon Ranch in Tucson, Ariz., according to the report.

According to data from Willis Towers Watson, roughly 22 percent of Fortune 500 companies said they paid for deluxe executive physicals in 2008. This number rose to 32 percent by 2013, and it was the only benefit that increased significantly over the five-year time period, according to the report.

"When you look at executive perquisites over the last five to seven years, companies really pared back," Rob Mustich, East Coast managing director of executive compensation for Willis Towers Watson, told The Washington Post. "But the executive physical is one perk that remains common." 

In a similar Hay Group study of the 300 largest companies, 40 percent offered the benefit in 2014, up from 38 percent in 2009, according to the report.

With median CEO compensation reaching $13.6 million in 2015, affordability is likely not the reason boards continue to provide executives with these health benefits. 

While CEOs can choose to share their health information, boards do not have access to employees' protected health information. One reason for the increase in health benefits for CEOs is because their health directly impacts investors' confidence in the company.

For example, after United Airlines CEO Oscar Munoz suffered a heart attack, the company's stock slipped 3 percent. It re-stabilized after United Airlines hired an interim CEO, but slipped again after the company announced Mr. Munoz had heart transplant surgery. Ensuring CEOs get comprehensive care reduces the likelihood that an unknown condition will be missed.

Another reason companies have increased CEO health benefits is because disclosing the cost of executive physicals shows investors how highly boards prioritize the CEO's health.

"That's probably why it's one of the few perks that large companies haven't really let go of," said David Wise, U.S. market leader for human resources at Hay Group. "What they're really buying is shareholder confidence."  

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