Report Says Top Execs Failing to Pay Off Company Loans

Many top executives are failing to pay back money they borrowed from their employers before the Sarbanes-Oxley Act stopped the practice 18 months ago, according to a new report.

The Corporate Library’s study, released Friday, says the average outstanding loan is $4.7 million for the 44 companies that disclosed the information. The Union Pacific Corp. tops the list of companies with outstanding debt, having loaned Chief Executive Officer Richard Davidson $10.97 million, Reuters reported.

The Sarbanes-Oxley Act stopped almost all loans after a stream of accounting scandals raised questions about how CEOs were using the loan money. Former WorldCom CEO Bernard Ebbers, for example, was loaned $408 million, which played a part in that company’s eventual bankruptcy. The law did not, however, require that the loans made before Sarbanes-Oxley be repaid.

"One would think companies would try to clean up their loans as soon as possible," said the study's author, Corporate Library senior research associate Paul Hodgson.

Most of the loans were made so officers could buy company stock or exercise stock options. Executives, who were encouraged to buy stock, were left with lower-valued stocks and a big loan to repay when the stock market fell.

Hodgson said the second-biggest reason for the loans was paying relocation costs. A relocation loan could sometimes reach $5 million, he said.

You may like these other stories...

Planning has begun to determine the content, design, and structure of the next version of the Uniform CPA Examination – and the American Institute of CPAs (AICPA) is asking the accounting profession for its feedback on...
Read more from Larry Perry here and in the Today's World of Audits archive.As RMM (the combination of inherent and control risk) increases, more and better evidence is needed to evaluate financial statement assertions....
Treasury Secretary Lew to speak on tax reform, inversionsDamian Paletta of the Wall Street Journal wrote on Friday that Treasury Secretary Jacob Lew is planning a September 8 speech about a controversial corporate strategy...

Already a member? log in here.

Upcoming CPE Webinars

Sep 9
In this session we'll discuss the types of technologies and their uses in a small accounting firm office.
Sep 10
Transfer your knowledge and experience to prepare your team for the challenges and opportunities of an accounting career.
Sep 11
This webcast will include discussions of commonly-applicable Clarified Auditing Standards for audits of non-public, non-governmental entities.
Sep 18
In this course, Amber Setter will shine the light on different types of leadership behavior- an integral part of everyone's career.