Beyond salary and stocks, some executives and board members find other ways to earn money from their companies. Consider these examples: Two board members at Foamex International Inc. had consulting contracts worth up to $150,000 last year, and the wife of Channell Commercial Corp.'s chief executive officer got $72,000 for offering advice on the company's insurance needs.
Such arrangements are not unusual, and they're not illegal. All companies have to do is disclose them in public filings.
But such business deals between a public company and a side business connected to its executives - known as related-party transactions - are attracting more attention from securities regulators in the wake of misdeeds at companies like Tyco and Enron. The Securities and Exchange Commission, for example, is reviewing its rules for the practices.
For critics, such transactions raise the appearance of double-dipping, a way for executives and board members to get more money from companies in circumstances that aren't clear to shareholders.
``These days they are considered more trouble than they are worth,'' said Charles Elson, director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. ``In a broad market, it's hard to argue these days that you're limited to a related supplier.''
Others, however, argue that most of the time such deals are appropriate, and can make good business sense. Companies say such deals undergo close scrutiny to see that they are in the best interest of shareholders.
Thermoformer UFP Technologies, for example, says its leases on two factories partly owned by board members and executives are at market rates: $150,000 a year for its Kissimmee, Fla., factory, and $95,000 for its Decatur, Ala., facility.
``We operate in 13 different locations and we're pretty adept at what the rates are in each geographic area,'' said company controller Al Hagan. ``I'd understand if the rates weren't competitive.''
The factories are owned by United Development Company Ltd., which is partly owned by UFP board members William Shaw and Richard Bailly (who also own 20 percent of UFP between them), by another UFP executive and by some unrelated parties, Hagan said. UFP also directly owns 26 percent of UDC.
Even when companies maintain the deals are fair, that does not always end the questions.
Canadian police and securities regulators are currently investigating extrusion company Royal Group Technologies Ltd. for C$32 million (US$24 million) worth of business it did with a Caribbean beach resort controlled by Royal Chairman Vic De Zen.
The company says the business dealings were fair, and said auditors hired by Royal found no evidence of improper conduct. But the ongoing probe from the Ontario Securities Commission and the Royal Canadian Mounted Police is attention the company would rather not have.
Related-party deals happen at companies of all sizes. Packaging giant Bemis Co. Inc. bought $9.6 million worth of products in 2003 from a company run by CEO Jeff Curler's brother-in-law, and another $2.9 million from a company run by a Bemis board member.
Bemis said both deals were at ``market competitive prices,'' and company spokeswoman Melanie Miller said the decision to buy from those related companies is made by unit managers who are held accountable for profits in their own divisions.
Plus, Miller said, the scale of the transactions is not material to the company's $2.6 billion in annual sales.
Other executives set up management firms that get money. Atlantis Plastics paid $2.4 million to a management firm controlled by Chairman Earl Powell, while auto parts maker Magna International paid $34.5 million to a consulting firm controlled by Chairman Frank Stronach.
Both Channell and Foamex did not respond to an interview request, and the companies did not say much about their arrangements in public filings.
Channell also said it rented manufacturing space from its chairman, William Channell Sr., for $1.3 million last year, for terms ``no less favorable'' than what it could find from independent parties.
Foamex paid its chairman, Raymond Mabus, $150,000 a year for consulting on its Asian business. And the firm said it paid director Robert Hay, who sits on its compensation committee and is a former CEO of the firm, $92,000 last year, also for Asian-related consulting.
One auditing expert said such related-party transactions have to be evaluated case by case. But the more a company has, the more likely auditors are to be skeptical, said Mark Beasley, a fellow at the Corporate Governance Center at Kennesaw State University in Kennesaw, Ga.
``Related-party transactions present a high risk for fraud,'' said Beasley, who is a professor of accounting at North Carolina State University in Raleigh, N.C. Still, he said, almost all companies have one type or another.
``It's hard to say companies should avoid them because in some cases they make strong business sense,'' he said. ``Basically, I want to be transparent to my shareholders.''