CEO Jet Set: BofA Gets Finger

A free report from The Corporate Library concludes that expenses related to CEOs’ personal use of corporate aircraft increased by over 9% at the median between 2007/2008 and 2008/2009. The increase occurred as the incidence of personal corporate jet use held steady.

The report, titled “Proxy Season Foresights #8: CEOs’ Personal Use of Corporate Jets Still Flying High,” analyzed such expenses at more than 2,500 Russell 3000 companies for which data was available for the last two years (as of January 29, 2010). For companies that had not yet filed proxy statements for the 2009 fiscal year, the sample included data from 2007 and 2008; 2008 and 2009 data was used for those that had already filed 2009 proxy statements. Key takeaways include:

• Fifteen percent of Russell 3000 and 40 percent of S&P 500 report aircraft expense for CEOs’ personal use
• Increase in the averages of reported expenses in the last year: 3.3 percent
• Aircraft expense is up an average of over 70 percent (median 9 percent) for Russell 3000 companies with expenses in both years
• Average payout in 2008/9: $131,340
• Median payout in 2008/9: $80,368
• Incidence rate holding steady (around 400 Russell 3000 companies in each of last two years)
• McGraw-Hill is an example of best practices in recouping personal expense
• Tax gross-ups and family use are still prevalent

The report concluded, “in the cases where tax gross-ups and family use were approved, it calls the corporate culture into question: if the board cannot set appropriate limits for the CEO in this regard, will it be able to do so in matters of greater strategic consequence?”

On a related note, Finger Interests Ltd., the Houston investment firm that tried to oust Ken Lewis from Bank of America last year, has a new target this year: The firm filed a motion Monday urging shareholders to vote against director Chad Gifford. According to the Fingers:

Mr. Gifford knew that Bank of America did not undertake sufficient due diligence when they acquired Merrill Lynch. He also knew it was a bad deal for Bank of America shareholders. But he did not have the courage or moral conviction to fulfill his duty to shareholders. Rather, he was more concerned with maintaining his position as a director of Bank of America and making sure that his employment agreement, which entitled him to 120 free hours on the corporate jet (each year), was renewed for another year.

According to a report in the Charlotte Observer, “Gifford had enjoyed a perk from the bank that let him use company-provided aircraft for up to 120 hours a year, in addition to his regular pay as a director. In 2009, Bank of America spent $956,007 on Gifford’s airplane use, plus $293,004 to help him pay the accompanying taxes. It did not renew the agreement for this year.” (Shareholder wants Bank of America director out, 3/30/10) Hat tip to Tweet from Bob Monks.