It's the norm these days for the largest firms to require CEOs to use private jets for all travel, including personal vacations, citing concerns for their executives' security. New York University School of Business professor David Yermack says that this arrangement "is like telling the CEO: 'We insist that you eat at a five-star restaurant for your own nutrition, and we insist that you drink $800 champagne for your health.'"
When corporate boards are approving such outrageous perks, you have to wonder what else they might be signing off on. Indeed, in virtually every recent case of corporate corruption, private jets have played a role. Countrywide Financial's Angelo Mozilo, under investigation for his role in the subprime mortgage meltdown, threatened to resign in 2007 unless the company let his wife fly with him and cover his personal taxes for the perk.
The private-jet perk is - literally and figuratively - a high-profile sign of an executive reward system out of control. It's time for corporate stakeholders, including institutional investors, to intervene to help CEOs break the habit.
