The gigantic sum Zuckerberg pays for security

At the end of a critical week for Facebook, one that included more than 10 hours of testimony on Capitol Hill by CEO Mark Zuckerberg about issues such as user privacy and data security, the company disclosed what it spent on a different kind of security: Its CEO's.

In a document filed late Friday, Facebook said it had spent US$7.3 million (NZ$9.92 million) in personal security costs and $1.5 million on personal use of private aircraft by Zuckerberg in 2017, a 54 percent increase from the year before, bringing the total to $8.8 million, compared with $5.8 million in 2016.

The figure for 2016 was also more than double what was spent on the next highest personal security bill for a CEO in the Fortune 100, according to an analysis by the executive compensation and research firm Equilar (companies have not all filed their figures yet for 2017). And it was several multiples higher than the amounts spent on other well-known, high-profile CEOs, such as Tim Cook, CEO of Apple, which spent $317,325 on his personal security and aircraft use in 2017; and Jeffrey Bezos, CEO of Amazon, which spent $1.6 million in 2016.

"This is the largest amount I've seen in the five years I've been looking at the Fortune 100 studies," said Dan Marcec, Equilar's director of content and communications, of Zuckerberg's 2018 figure. He said it was "far outsized from what we've seen for any other CEO, even within the tech industry, which tends to have high-profile CEOs, leading to higher security costs."

A Facebook spokesperson declined to comment on the reason for the significant increase in Zuckerberg's security-related expenses for 2017, saying in a statement that "Facebook's board of directors believes that this investment in Mark's personal security is entirely justified. He is central to Facebook's future success and as founder and CEO of the company has a high public profile." The security expenses make up almost all of Zuckerberg's 2017 compensation: Already one of the world's wealthiest billionaires, he gets a $1 salary and no annual bonuses or new stock grants from the company.

But the big increase did come the same year Zuckerberg made it a goal to "have visited and met people in every state in the U.S. by the end of the year," the latest iteration of Zuckerberg's annual "personal challenges," which have included learning Mandarin or running a mile each day. In the aftermath of President Donald Trump's election, many speculated whether Zuckerberg's carefully orchestrated road trip, which included photo-ops with farmers in Wisconsin, firemen in Indiana, and college football coach Nick Saban in Alabama, was part of grander political ambitions or a way to make amends after a tough year for Facebook's image.

For his part, Zuckerberg said the trip would help him "personally hear" more voices in America, and would "help me lead the work at Facebook and the Chan Zuckerberg Initiative so we can make a positive impact as the world enters an important new period."

Whatever the reason for the sizable increase in security costs, some believe the company should be more transparent. "At a minimum, shareholders deserve disclosure about why" costs increase that noticeably, said Rosanna Landis Weaver, an executive compensation expert for the nonprofit As You Sow. "When there's a marked increase like that, there should be an explanation in the footnotes."

In the company's filing, it said the "overall security program" was authorized "because of the high visibility of our company" and was designed to address "safety concerns due to specific threats to his safety" that include security systems for Zuckerberg's personal residences, annual costs of security personnel and private aircraft. Yet that passage was identical to language used in the company's proxy the year before.

Facebook has not always provided as much information as it does now. In 2016, Bloomberg reported that the company disclosed what it had spent on Zuckerberg's personal security for 2013, 2014 and 2015 for the first time after questions from the U.S. Securities and Exchange Commission. In its proxy, Facebook says it does "not consider Mr. Zuckerberg's overall security to be a perquisite for his benefit," but now discloses the costs as "all other" compensation in the company's proxy. A Facebook spokesperson declined to provide additional information.

The security and aircraft costs for Zuckerberg - who is certainly one of the most recognizable and wealthy chief executives in America today - may be much higher than most CEOs, but is not unusual for companies to pay for and often require personal security expenses or private aircraft use for their CEOs. Even at their personal home or during personal travel, paying those expenses is often seen as a precautionary measure that outweighs the costs for the safety of such a key figure, said Jim Barrall, a senior fellow at UCLA's School of Law and former head of the executive compensation practice at Latham & Watkins.

"He's the founder and face of that company, and has been the subject of specific threats," Barrall said, according to Facebook's proxy. "If I were on the board, I would want him protected 24/7." He also noted Zuckerberg's total security costs are presumably much higher for business-related events that occur during business hours, which don't have to be disclosed in the compensation table.

Still, Zuckerberg's costs tend to dwarf those of other CEOs. According to Equilar's analysis, among the 35 companies in the Fortune 100 that paid security expenses for their CEO in 2016, the median amount was just $53,225. Of those 35 that have updated their filings for 2017 since Equilar's analysis, none of the personal security expenses for CEOs (not including personal aircraft) topped $400,000. Berkshire Hathaway said it paid $375,000 for Warren Buffett's personal security.

- Washington Post