Firms reduce pain of executives asked to relocate to new city

Executives asked to uproot and move to another city are being given much better incentives.

Many executives are holding out for better incentives before moving town.

A lot of executives don’t relish the idea of disrupting their lives to take a distant job, but they don’t have to in the present strong economy in the US. That is why more companies are offering rich relocation packages to lure top talent to another city.

Senior managers are winning flexible schedules that allow them to commute long distances, ­extended temporary-housing con­tracts and bigger sums to cover money lost on home sales, recruiters and compensation specialists say.

“Talented executives asked to relocate now have the power to get what they need from an ­employer,” says Hayes Reilly, a managing partner at executive search firm Preston & Partners Talent Solutions.

Some businesses have gone so far as to shell out millions to move key players from far away. LendingClub spent nearly $US6.4 million to bring two new top officers and their families to the San Francisco Bay Area last year, according to an analysis of data from company proxies by research firm Equilar. That sum largely reflects $US3m in relocation bonuses for Steve Allocca, the new president, and Thomas Casey, LendingClub’s chief financial officer. Both men moved from less costly cities in Texas.

“We rebuilt our executive team after the departure of the then CEO in May 2016,” says a spokesman for the online lender. “Finding the best talent for these positions was important to show company stability and ­reassure shareholders.”

LendingClub was the biggest spender among the Russell 3000 companies giving relocation benefits to 772 senior executives last year, Equilar’s analysis for The Wall Street Journal showed. Other big spenders included General Electric, with $US4.24m going to relocate four executives, and Caterpillar spending $US2.66m to relocate five executives.

The average relocation package for the biggest 3000 publicly traded companies in the US totalled $US144,633, Equilar says.

Americans are less willing to uproot their lives for new jobs than they used to be, as changing family ties and more ­positions closer to home weigh on their decision-making. The number of people relocating for work fell 10 per cent between 2015 and last year, according to US Census data.

To overcome such resistance, 86 per cent of US employers ­offered extra incentives or made policy exceptions for relocated staff last year, up from 65 per cent five years before, according to surveys by Atlas Van Lines, a relocation company. The most popular tactic last year was to ­extend temporary housing stays, the moving company says.

“A company that doesn’t ­accom­modate an incoming exec­utive’s honest relocation needs is signalling that those aren’t import­ant and risks losing that ­recruit,” says Stephen Zweig, who heads the executive compensation practice at law firm Ford & Harrison.

A generous relocation package helped Preston & Partners woo a Long Island, New York, executive this year for a retailer in Bucks County, Pennsylvania. The first-rung vice-president received a $US100,000 ($139,700) relocation allowance plus a $US50,000 signing bonus, Reilly says.

He sees similar ­arrangements in about half of his firm’s searches at that executive level, or roughly double the proportion he saw five years ago. “Employers have had to be more flexible with relocation times and terms,” he says.

That proved true for Jon ­Achenbaum even after he got a job in 2015 running Freeman Beauty, a marketer and distributor of beauty care products based in Los Angeles. His wife didn’t want to leave New Canaan, Connecticut, where she runs a non-profit group, so Achenbaum rented a condo near Freeman’s California headquarters and paid for personal trips back to the east coast.

The chief executive struck a better deal in August last year after Yellow Wood Partners bought the company. The new private equity owner extended to Achenbaum an annual allowance for his long-distance commute and granted him three days a month to work from home in Connecticut, with a promise to double that frequency during his contract’s second year.

Yellow Wood declined to comment on the arrangement. Achenbaum says he quit Freeman in May anyway, mostly because of his wife’s refusal to relocate. “For my next CEO position,” he says, “I’m not open to a role that requires a long-distance ­commute.”

Certain companies relocate headquarters, bringing the office to the new chief executive. Consider Brian Niccol, hired in March from Taco Bell to run Chipotle Mexican Grill.

Niccol’s wife changed her mind about uprooting their three school-aged children just before the restaurant chain announced his appointment, so Chipotle directors allowed him to shift the company’s Denver headquarters to Newport Beach, California, where he lives, according to a person familiar with the matter.

“The headquarters relocation is not just for Brian,” the person says. “Chipotle knows it’s also ­important to have a happy CEO.”

A Chipotle spokeswoman says the idea that Niccol’s family considerations prompted the shift in headquarters is “speculative and inaccurate”. Moving the company’s main office to California makes it easier to fill tech-related positions, she says.

Chipotle previously said the move affected about 400 people in its Denver and New York offices.

Some big companies will cover certain executives’ losses when they sell their homes. Walmart spends up to a capped amount for US-based executives transferred within the country, a spokes­woman confirmed, but would not divulge the loss limit.

Such buyouts don’t always please investors. Institutional Shareholder Services, a proxy ­adviser, considers them “excessive perquisites’’ without links to performance. ISS questioned General Electric for spending about $US1.7m — including buyouts — to relocate chief executive John Flannery twice since 2016.

He lost money selling Connecticut and Chicago homes last year despite GE reimbursing 75 per cent of his losses, according to a spokeswoman. “The company ­understands the concerns ISS highlighted and continues to ­review costs,” she says.

WALL STREET JOURNAL