“Like many successful chief executives, Alexander E. Benton enjoyed the good life,” writes Joann Lublin in today’s Wall Street Journal.

“There was the $4 million estate on more than six acres near Santa Barbara, complete with Pacific views, pool, formal garden and a wine cellar. In Carmel, Calif., he and his wife had another home, valued at about $1.7 million. Then there was a house in Ventura, which sat on an 8,712 square-foot lot.”

“Mr. Benton, head of Benton Oil & Gas Co., had his pick of six cars, including a 1963 Jaguar and a 1964 Porsche, two other sports cars and a Land Rover. He owned 15 antique watches and fine art valued in the thousands of dollars.”

“Much of Mr. Benton’s luxury acquisition spree was funded with debt, and when it came to shopping for credit he found some pretty easygoing loan officers. They were Benton Oil’s directors, and over nearly five years, they extended him roughly $6.6 million in loans.”

“It turned out that Mr. Benton wasn’t a very good credit risk. The loans were secured by his company stock and options. When oil prices dropped in the late 1990s, so did Benton Oil’s share price. By the summer of 1999, the balance owed on the loans exceeded the collateral’s value. The directors demanded early repayment and ultimately ousted him.”

“Mr. Benton, 59 years old, now lives in a rented London flat and doesn’t own a single car. He has earned the dubious distinction of being the first head of a public company in recent memory to file for bankruptcy over his corporate IOUs. He officially emerged from bankruptcy after a court hearing in Santa Barbara Wednesday. That will enable directors to soon figure out how much of the company’s money they’ll recoup.”

” ‘It was a no-win game,’ says now-retired director Bruce M. McIntyre, about the succession of loans he and fellow board members approved for Mr. Benton. ‘With 20-20 hindsight, we should not have done it.’ “

“As the economy has faltered, directors of many companies have found themselves saddled with problem loans to CEOs that not too long ago seemed innocuous. A look inside the boardroom as these loans were greenlighted shows just how willing directors were to cede power to their CEOs while the good times rolled. Ignoring the possibility of an economic downturn, they rarely held their CEOs accountable for the loans, and kept handing out more easy money.”

“It was only after the market began its decline that directors realized they’d signed a devil’s pact. Demanding repayment, it turned out, could backfire on the company: Executives might be forced to dump their company shares in an already fragile market. Or they might face public financial ruin.”

“On top of generous salaries and bonuses, not to mention stock options and restricted shares, chief executives in recent years have received a stunning array of benefits. These often included free financial planning, home-security systems, generous life-insurance policies, lifetime pensions, chauffeur-driven cars and post-retirement use of company planes, cars, offices and secretaries.”

“But the hundreds of millions of dollars in loans outstanding to corporate chieftains rank among the most potentially problematic of those perks. They represent a massive outpouring of money from company coffers. Executive officers at 89 of 350 major U.S. public companies owed their employers almost $256 million last year, according to an analysis of a sample of proxy statements by Mercer Human Resource Consulting. And that doesn’t include the staggering $408 million that WorldCom Inc. lent to former chief Bernard J. Ebbers, who has become sort of a poster boy of unpaid CEO debt.”