On June 20, 2023, the SEC Enforcement Division announced the latest in a continuing series of perks-focused enforcement cases.  This latest case involved Stanley Black and Decker, Inc. (SBD) and a former company officer, Jeffrey Ansell.

According to the SEC’s Order, SBD failed to disclose “at least $1.3 million” in perks paid to four named executive officers and one director.  These perks related primarily to the use of the company aircraft.

Ansell, who had been Executive Vice President of SBD and President of SBD’s Tools & Storage segment, “received undisclosed compensation that consisted, in part, of $280,000 in personal expenses he charged to the company,” according to the SEC Press Release.

In an example of how cooperation with the SEC can impact on the enforcement process, the SEC did not impose a civil penalty against SBD.  As you can read in the Order, SBD’s cooperation was extensive.  It included a special investigation by outside counsel under the oversight of a Special Committee of independent directors, prompt self-reporting, extensive cooperation with the Enforcement Division, and prompt remedial actions and public reporting of the misstatement.  In addition, based on the company’s self-reporting, cooperation, and remediation, the SEC did not bring any charges against the company because of Ansell’s conduct.

Gurbir S. Grewal, Director of the Enforcement Division, made this comment in the Press Release announcing the action:

“Today’s action not only reaffirms the Commission’s commitment to enforcing executive compensation disclosure rules, but also to incentivizing self-reporting and cooperation when entities and individuals discover violations of the federal securities laws.”

Ansell paid a $75,000 civil money penalty.

Many perks enforcement cases find that companies do not use the appropriate definitions and processes to determine perks.  The SEC’s Order (with a bit of a call back to the Dow case), quotes the Adopting Releasethat enacted the current requirements for perks disclosure:

“…an item is not a perquisite or personal benefit,” and does not need to be reported, “if it is integrally and directly related to the performance of the executive’s duties. Otherwise, an item is a perquisite or personal benefit if it confers a direct or indirect benefit that has a personal aspect, without regard to whether it may be provided for some business reason or for the convenience of the company, unless it is generally available on a non-discriminatory basis to all employees.”

The SEC’s Order draws from the Adopting Release stating:

“…the concept of a benefit that is ‘integrally and directly related’ to job performance is a narrow one,” which “draws a critical distinction between an item that a company provides because the executive needs it to do the job, making it integrally and directly related to the performance of duties, and an item provided for some other reason, even where that other reason can involve both company benefit and personal benefit.”

Again, from the SEC’s Order, even where the company:

“…has determined that an expense is an ‘ordinary’ or ‘necessary’ business expense for tax or other purposes or that an expense is for the benefit or convenience of the company,” that determination “is not responsive to the inquiry as to whether the expense provides a perquisite or other personal benefit for disclosure purposes.” Indeed, “business purpose or convenience does not affect the characterization of an item as a perquisite or personal benefit where it is not integrally and directly related to the performance by the executive of his or her job.”

As always, your thoughts and comments are welcome!