The Cost of Corporate Security

The assassination of UnitedHealthcare CEO Brian Thompson revealed corruption in society that justifies higher corporate spending to protect executives.

Brian Thompson, CEO of UnitedHealthcare, was assassinated in midtown Manhattan on December 4, 2024. Mr. Thompson was in the city to attend the company’s investor day and was gunned down in a targeted killing shortly before dawn. The fifty year old executive was married and had two sons. The story has been widely covered in the media, but so far the hunt for Mr. Thompson’s killer has been unsuccessful despite numerous images of the suspect captured in various parts of the city.

Immediately after the murder, social media erupted in controversy regarding the state of the healthcare system in the United States in general, with a focus on the policies of UnitedHealthcare in particular. Critics have long alleged that health insurers engage in deliberate denial of care that ought to be covered under the contractual terms of policies, and that maximizing profits takes precedence over the well-being of policyholders. The killer was motivated by such sentiments given that the bullet casings used in the murder had text such as “delay” and “deny” written on them.

Aside from the inappropriateness of debating flaws in the healthcare system in the hours after a man has been murdered, some high profile media personalities appeared to celebrate the assassination. Perhaps the most notorious example is a social media message written by the “journalist” Taylor Lorenz just hours after the murder:

The isolated rantings of a morally bankrupt individual might be inevitable in such a situation, but Ms. Lorenz’s post was representative of a segment of society that has become so desensitized to questions of good versus evil that murder can not only be easily justified but even celebrated. Just when I thought that our society could not degrade any further, I read about a nauseating “look-alike” contest in New York in which people competed to dress like the suspected killer. The hero-worship of the killer is clearly making it harder for authorities to make an arrest.

Mr. Thompson was an executive running a company that operates in a highly political environment, but he was hardly a household name or an instantly recognized face. Prior to the killing, I had never heard of Mr. Thompson and his picture was not one that I recognized. I am a daily reader of financial news, so if this executive flew under the radar for me, it is obvious that Mr. Thompson was likely not recognized by almost everyone on the streets of New York City, in airports, or in other public settings.

I have long been skeptical of the cost of corporate security that I regularly read about in proxy statements. However, this killing and the general degradation of society has led me to rethink my objection to paying higher security costs as a shareholder. I am not alone in considering whether security needs to be beefed up for executives, especially in industries that are subject to criticism.

Public corporations cover the cost of workplace security for executives as a part of their general operating costs which are typically not disclosed to shareholders in granular form. However, the cost of security outside of the workplace is reported as a component of executive compensation on proxy statements. The following graph from a recent Wall Street Journal article shows the cost of security for several companies:

Source: Wall Street Journal

Security costs can range widely. Mark Zuckerberg’s personal security cost $23.4 million in 2023 according to Meta’s proxy statement. In contrast, Berkshire Hathaway spent just $413,595 on Warren Buffett’s personal security in 2023. Since both men are equally well-known and recognizable, it is not clear why Mr. Zuckerberg’s security cost so much more, but it is undeniable that both men require personal security outside of the office. The question is how much is needed.

It is more difficult to determine how much to spend on executives who are far less well-known than individuals like Mark Zuckerberg and Warren Buffett. How can we determine what to pay for home and personal security for lesser known executives? Should such executives be required to travel privately to avoid risks in airports? Where does prudent management of risk become an excuse for lavish perquisites that cannot be justified aside from providing security?

I have long been critical of most companies that pay for private security for executives and I have had even more disdain for policies that require executives to fly privately. I have always seen such policies as boondoggles justifying lavish treatment of people who are not widely recognized by the general public. I have never been critical of such expenses for public figures, but only a small percentage of S&P 500 executives would be recognized by the general public in places like airports.

Mr. Thompson’s assassination and the loathsome reaction of far too many individuals requires a reassessment of my prior beliefs. In the current environment, the pendulum could easily swing too far in the direction of providing security for all top executives, even in cases where there is hardly any risk. Some judgment here is warranted. The executives of companies that are mired in political controversy face greater risk than those engaged in businesses that are not a bit controversial. A healthcare executive clearly needs more protection than an executive of a machine tool company.

A minimum baseline of trust is essential for a functioning society, and unfortunately the United States currently suffers from a massive trust deficit. The cause of this deficit is complicated, but it seems to me that the moral compass of a large segment of society has significantly deteriorated.

The costs of living in a low-trust society are significant, ranging from locked up displays of mundane consumer products at drug stores to paying higher security costs for corporate executives. The issue of corporate security has always been a matter of principle for me. The cost of additional security for large corporations is not likely to impact the bottom line, but it can set a tone for the overall level of frugality in an organization and can impact morale for workers lower on the totem pole.

At this point, I would err on the side of caution and plan to be less critical of security expenses when I review the flood of proxy statements that will arrive early next year.

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