The WSJ did a study of executive compensation by CEOs.  One of the items examined was the payment of perks.  They were, in the study of 200 companies with sales over $5 billion, common, with, as usual, personal use of corporate aircraft the most common.  As the article noted:

• A public backlash against executives flying in private jets erupted last year when the CEOs of the Big Three U.S. auto makers were excoriated by members of Congress for flying private jets to Washington, D.C., to appeal for government aid. The perk was common last year: 104 of the 200 companies in the Journal survey covered the cost of personal air travel by their CEOs in 2008, down only slightly from 107 in 2007. The median value of the perk jumped to $115,500 from $79,000, probably because of higher fuel prices, Mr. Wise said.

The existence of the perk illustrates several things.  First, boards routinely permit CEOs to use the corporate aircraft for personal travel.  In other words, this is not about the use of corporate aircraft for business.  If the CEO wants to fly to Palm Springs to play golf, the corporate aircraft is the ticket. 

Second, personal use is quite costly to the company.  The CEO has to pay taxes on the amount of personal use of the aircraft (it is after all executive compensation) but the IRS does not require that taxes be paid on the incremental cost to the company.  As we have noted on this Blog, the IRS formula (which depends on the size of the aircraft and the distance flown) essentially requires the CEO to pay taxes on a first class plane ticket.  So the corporation incurs thousands of dollars of cost and receives nothing from the CEO.  The CEO merely pays a tiny fraction of that amount in taxes.

Third, this illustrates the weakness in the Delaware model of executive compensation.  The board has to justify the personal use of corporate assets.  The usual justification is that it is necessary to ensure the security of the CEO.  Is it really the case that there is a meaningful security risk in flying to Palm Springs to play golf?  As we have noted over and over, Delaware generally renders as unreviewable any form of compensation that is approved by independent directors who are not really independent and who are not very informed.  Directors have an incentive to approve transactions that are not in the best interests of shareholders, but rather in the best interests of management.  Surely the widespread personal use of the corporate aircraft is an example.  At least the boards could require that CEOs reimburse companies for these charges.  If that occurred, use would plummet precipitously.  

Fourth, this shows that for all the criticism over the auto makers and those companies receiving a bailout, personal use of the aircraft is quite common among all categories of large companies.  As Congress mulls a solution, this data demonstrates that the solution needs to extend to all companies and not just those accepting public funds.