I was perusing the Wall Street Journal this and you will never guess what I learned? I was stunned to find that high-ranking corporate executives sometimes use the corporate jet for personal use. Not only do they fly the company plane for interminable meetings with Wall Street analysts, big customers and regulators, occasionally, they use it to fly to the Virgin Islands.
Ladies and gentlemen, I am floored. Do you mean to tell me that there are perks associated with being the CEO of a fortune 50 company?
I want to make a few things clear, I am against corporate theft and I am for corporate transparency, but I feel that there is more to the outrage over these allegations. I sense that people have their undies in a bunch because CEOs and other executives are ‘living the high life.’ CEOs are fat cats while the lowly worker toils in obscurity for lousy pay and benefits. Whether the American worker is properly compensated is a discussion for another time and another column – but American workers are often interchangeable and somewhat commoditized (your feckless writer included). But CEOs are different and thus should be treated differently.
We as casual watchers of corporate shenanigans should not be so quick to assume that being a CEO is easy or that it is particularly glamorous. CEOs are often unfairly blamed for the misfortunes of their companies (and I would also add, unfairly feted for their successes), they are open to public scrutiny, they are personally liable for the shortcomings of their accountants and employees (see Sarbanes Oxley) and although it sounds like fun to you and me, they have brutal travel schedules. These travel schedules are not all about cocktail parties and hotel openings – often it is meeting with angry customers, skeptical analysts and smug money managers, often in rapid succession.
We as investors in these companies really want one thing; we want to see our investments grow. Above all else, we want the appropriate team assembled at the heads of our companies working hard to make us money. [If one of us has an axe to grind about Wharton-Educated CEOs making too much money, one ought to look into real estate or other investments.] There are two issues here, first, are our companies disclosing all the perks that our CEOs are receiving –I hope that answer is yes, but there has to be a materiality check here. If the CEO sometimes takes some personal calls on his (or her) cell phone, but expenses the entire cell phone bill, I am alright with that. If the CEO sometimes uses the office photo copy machine for the NCAA basketball pool, great. If the CEO uses the company credit card on a three-night, strip club bender with aged scotch and steak dinners, as long as it is with potential customers, I am also OK with that. If the dollar amount of those perks gets to be large, yes, they should be disclosed. But if the question is whether or not these executives should be able to have any personal perks, I would have to say yes. But the second issue, whether or not they are entitled to extraordinary perks is more interesting.
If this argument was about Tom Brady and the New England Patriots, I bet fewer people would care. They would say that Tom is completely irreplaceable. But let’s examine this further. First off, being a CEO of a fortune 50 company is probably more difficult than being QB for the Pats. First off, Tom Brady is only realistically competing against men, aged 22-30 who have attended a top 25 school and played QB there. If you are a CEO, you are competing against men and women, aged 30-70 who hail from virtually anywhere on the globe. If you are the CEO at one of these firms, you are probably more unique and have battled tougher odds to get there. Secondly, it takes about one season (maybe two) to learn an NFL offense. How long do you think it takes to meet, greet and gain the trust of all the significant people that come in to contact with a large company? There are competitors, customers, suppliers, analysts, money managers, recruiters and lawyers; let alone learning about the actual business. These people take longer to cultivate, are tougher to find and I would argue are more valuable to their organizations.
What am I getting at? In order to keep one of these leaders at the helm of our companies (and once we are shareholders, it is important to think of our investments as ‘our companies’) what would we be willing to pay? If it is an extra couple hundred thousand dollars in air miles, I bet we would all be happy to pay it. And furthermore, if our CEOs are somewhat safer in terms of kidnapping or other pratfalls, we get that for free. And just to pile on, if our CEO is even slightly more likely to fly out and meet a client or a potential hire than to do it over the phone because he can fly on the corporate jet, then great.
To sum up; yes, we as shareholders want visibility in to the compensation packages of our CEOs but we also want to keep them happy, motivated and in the game. So Mr. Otellini, please have some extra peanuts on your way to Milan. Mr. Camilleri please, choose whichever DVD we have in the plane’s library and Mr. Weill, please have an extra drink on me on your way to San Francisco.
Tags: corporate greed