American International Group, Bank of America, Citigroup and Wells Fargo & Co. this month met a U.S. Department of Treasury mandatethat requires Troubled Asset Relief Program beneficiaries to publish policies on what Treasury called "excessive or luxury expenditures." The firms outlined how each would manage "entertainment or events, office and facility renovations, aviation or other transportation services, and other similar items, activities or events" following public outrage this year over what was publicized as fiscally irresponsible decisions.
Use of corporate-owned aircraft drew much criticism from the media and elected officials, but Bank of America--recipient of $45 million in TARP funds, according to the New York Times--on its Web site said senior management is "encouraged to use corporate aircraft when traveling on business for the corporation for safety and efficiency purposes. Other upgraded transportation services are also allowed when reasonable for business purposes, business development, safety or when it is the most cost-effective method of transportation."
For Bank of America executives, there is no pre-approval process to use the corporate aircraft, but there will be periodic reporting of usage to senior management, "eliminating the likelihood of a violation," according to the company.
Some other firms appear to have tighter controls. In order for executives at American International Group--which accepted $68.9 billion in taxpayer money--to use the corporate jet, they must seek written approval from the vice president and the chief administrative officer or the vice chairman of transition planning and administration. Executives must clearly state their business purpose--after which a review will be conducted comparing the cost of using the corporate jet versus a commercial airline--or prove that using a commercial airline would jeopardize the employees' business commitments. Additionally, AIG asserted that internal audits would be conducted quarterly, and periodic compliance assessments would also be conducted.
Citigroup Inc., which received $50 billion in TARP funding, detailed similar mandates: Employees can only use corporate aircraft "for business travel if commercial flights are not reasonably available or if required by security." Should that be the case, employees must seek written approval from Citi's executive committee, CFO John Gerspach and the director of Citi aviation.
At Wells Fargo & Co.--the recipient of $25 billion in federal financing--senior executives and members of the board can only use company-owned aircraft if the cost to the company can be justified by the business purpose. However, only CEO John Stumpf and senior executives who are members of the operating committee can use the aircraft without pre-approval and authorize "his or her own business use."
Meetings, Events And Entertainment
AIG is infamous for holding an incentive meeting at a St. Regis hotel in California shortly after receiving public funds, but the company since has issued detailed limitations on meeting and events spending, according to its Web site. Citigroup issued mandates in which employees are subject to daily per diems for meetings, events and client entertainment, and employee use of entertainment tickets is strictly monitored.
For these companies, the CEO and CFO were given the additional responsibilities of having to monitor "excessive or luxury" spend. AIG employees must report activities to the chief administrative officer, who now oversees compliance to the new policy. All AIG meetings and events, office and facility renovations and aviation or other transportation services all need pre-approval from the CEO, CFO, or the CAO.
Citigroup implemented tracking and reporting processes, wherein expenses are reported to the CFO before payment in order to identify and report deviations from policies.
AIG and Wells Fargo employees can call an expense hotline before they make a spend decision and to report any violations of the policy.
AIG, Bank of America and Citigroup claimed that employees who are noncompliant with the policies will not be reimbursed for any lavish spend. All four companies reiterated any violators of the policy could be terminated.