At the Getty, the board makes excuses when it should be making reforms.

JOHN Biggs is in a bit of a fix. As chairman of the J. Paul Getty Trust, he must defend the extravagant compensation and perks that the board has bestowed upon its president and chief executive, Barry Munitz. This is the same Biggs who several years ago was praised for his reformist views on corporate governance--so much so that the accounting industry derailed his chances of heading the government's accounting-oversight board because it didn't like his support for expensing stock options, among other things.

Biggs also understands the importance of justifying executive pay--so much so that when he was making $5.1 million as head of the TIAACREF, the giant college teachers' pension fund, he claimed to have turned down the board's offer of a raise. "I said it wasn't right. My job is not comparable to Sandy Weill's," he told Institutional Investor, referring to the former chief executive of Citigroup.

So why on earth is this reasonable-sounding guy signing off on Munitz's spending sprees, which according to the Los Angeles COMES Times include routine first-class travel around the world for him and his wife and a $72,000 Porsche Cayenne that the Getty bought him (the Times story quotes Munitz as telling an aide that the SUV should have the "best possible sound system" and the "biggest possible sunroof')?

I tried to get Biggs on the phone, but we never made a connection. Besides, according to Mike Sitrick, the Getty's crisis PR consultant, he's not ready to talk about the Times story. He also avoided the more general question of whether non-profit boards have the same fiduciary responsibility as public companies when it comes to governance matters.

What I can tell you is that Biggs considers the Times investigation to be a crock, and as of late last week the Getty honchos were preparing a lengthy response in which they supposedly dismiss everything the newspaper dredged up while affirming their support for Munitz.

Mailer of perception

Biggs did send me a lengthy e-mail in which he describes the Getty's policy on compensation, travel and expenses. There is a lot of detail, including claims that the Times story had vastly overstated Munitz's compensation for fiscal year 2002-2003, the most recent period on file at the Internal Revenue Service.

Like most anything in the world of executive pay, it really depends on how you count the numbers. The Times appears to take Munitz's base pay of $567,500 and add in deferred compensation, retirement benefits and tax breaks to come up with its figure of around $1 million. The Getty folks claim that deferred compensation is exactly that--deferred--and that some of the retirement money was overstated due to some contradictory disclosure requirements by the feds.

To be frank, little of this seems like a big deal (the numbers actually appear pretty reasonable given the Getty's size and influence). What does matter is the perception that Barry Munitz is out of control--first suggested with the stormy resignation of Getty Museum Director Deborah Gibbon (who apparently rode in plenty of first-class seats herself), followed up with the Times piece, and finally Sen. Charles Grassley's rebuke of the Getty board for "spending more time watching old episodes of 'Lifestyles of the Rich and Famous' than doing its job of protecting Getty's assets for charitable purposes."

Grassley is the Republican chairman of the Senate Finance Committee, which is considering overhauling laws governing nonprofits. Among the suggestions floating around are tighter restrictions on first class and spousal travel.

These are not unreasonable ideas. While Biggs said that the Getty Trust has a detailed policy on business and travel expenses that require Munitz to submit bills and vouchers like everyone else, there's no way of knowing whether the Getty has ever turned down a Munitz expense report. The Getty folks certainly aren't saying.

It's not a minor point, considering some of the expenses.

The Times highlighted a 2000 trip Munitz and his wife took to Tuscany. They stayed at the Villa Ortaglia, a 15th century farmhouse built by the Medici family, toured museums and churches whose art works were restored with Getty money, met with lots of academics and curators, and hosted a bunch of dinner parties. All told, it cost the Getty $35,000, including $13,000 for the first-class airfare (numbers that the Getty did not dispute when I brought them up last week).

Some time later, the Munitzes sailed along the Dalmatian coast on a 165-foot yacht chartered by Eli Broad and with travel mates Richard Riordan, Ron Burkle and Jay Wintrob (Burkle and Wintrob happen to be Getty directors). The Getty rulebook allows Munitz to mix business and pleasure, so long as he forks over the expenses for the pleasure part. But those lines can get fuzzy on the Adriatic. If the yacht pulls up to some ancient rain, is it on the Getty's dime or Munitz's? For that trip, the trust reimbursed Munitz $7,000; Sitrick said he was certain the total cost was far higher, although he couldn't put a price on it.

Whatever. Point is, why would Munitz want to suggest any impropriety by charging the Getty in the first place? Or even by taking the trip? Despite its bountiful resources, the Getty is a non-profit, tax exempt organization and as such is supposed to serve the public good.

Does an excursion on Eli Broad's yacht qualify?

Defending Munitz

Then there's that Porsche SUV. Munitz is contractually entitled to a car, which is standard stuff" at this level but really kind of ridiculous for a guy making into the upper six-figures. And it's more ridiculous when the vehicle he selects is a souped-up Porsche. If the board had bought Munitz a Prius for 25 grand and jacked up his compensation by $50,000, nobody would have even noticed. Porsches people notice.

Which brings us back to John Biggs, who ironically gets high marks from all the fight people on matters of corporate responsibility. When Biggs lost out on that accounting-oversight job, here's what he told Bill Moyers on the PBS series "Now": "I've talked to people, senior people in the accounting industry, and they've sort of shame-facedly said to me, yes, we did oppose you, and we're sorry about that, but we don't want the independent standards that you have at the TIAA-CREF spreading to the whole industry."

Biggs is also known for taking the moderate road on compensation. In his e-mail, he insisted that the Getty's philosophy matches that of TIAA-CREF, whose policy statement on corporate governance notes that "executive compensation practices provide a window into the effectiveness of the board. Through the compensation committee, the board should implement rational compensation practices that respond to the company's equity policy, including conditional forms of compensation that motivate managers to achieve performance that is better than that of a peer group."

Read those words closely and tell me that's the way the Getty is ran. I kind of doubt it. Barry Munitz might or might not be the best thing that's ever happened to the place--the job description is so broad it would be hard for an outsider to tell-but his spending habits and perks are more than a little out of whack. So is his judgment. And the Getty board, like so many corporate boards, goes along with the excesses--perhaps out of fear or perhaps just resignation that even in an age of Sarbanes-Oxley, it's the way their world works.

That's probably why they haven't said much about the Times story. That's probably why they haven't said much about the Grassley comments. Just grumble in a few discreet places and hope that the questions will fade away. There's a pretty good chance they will.

Mark Lacter is editor of the Business Journal. He can be heard every Tuesday morning at 6:55 and 9:55 on KPCC-FM (89.3).