You Are Now Free to be Tracked about the Country: The Wall Street Journal Launches Jet Tracker

You Are Now Free to be Tracked about the Country: The Wall Street Journal Launches Jet Tracker

June 17 2011

In recent years, executive perquisites have received increased scrutiny from shareholders, shareholder advisory firms and the press, and no perquisite serves as a greater lighting rod than personal usage of corporate aircraft.  The 2006 SEC proxy disclosure rules, which require the cost of personal travel on company aircraft to be disclosed if it exceeds $25,000 per year or more than 10% of the cost of all perks, make details regarding this perquisite readily available.

Some believe these values have been under-reported by companies, but it is difficult to independently validate these beliefs.  While flight data for aircraft owned by many public companies has been publicly available through flight tracking websites for years, to complete a search most websites require a plane’s tail number, which can be hard to connect to a specific corporation.

Yesterday, the Wall Street Journal made it much easier for the general public to connect the dots.  In connection with their June 16, 2011 front page article entitled, “Corporate Jet Set: Leisure vs. Business,” they launched an interactive Jet Tracker database.  Now anyone can type in a company’s name and see where and how often that company’s aircraft have traveled since 2007.  The article focused on flights to and from vacation locations, including resort areas and executive’s personal vacation homes, and questioned if personal usage is being under reported by certain companies.  Additionally, the Jet Tracker site provides an estimated total cost for each flight, facilitating comparisons with amounts previously disclosed in the annual proxy statements.

Our View
The launch of this database has the potential to produce fact checking or “gotcha”-type articles by local news outlets and, in some cases, shareholder comments.  While we believe this will drive additional attention to the topic and has the potential to cause Boards to rethink their aircraft polices, this should be a non-event for most companies.

The fact that the imputed income attributed to executives for such travel for tax purposes is significantly lower than the amounts reported for proxy purposes continues to make this an attractive benefit.  Additionally, the aspects of time-savings and security add to the justification of such a perquisite.

As with all things compensation- or perquisite-related, companies should carefully assess their aircraft usage policy in light of current competitive practices and properly disclose all personal usage in the annual proxy statement.  Unlike many compensation- or perquisite-related issues, some Boards will have to consider executive security when it comes to their aircraft policy.  In these cases, it should be clearly noted in the proxy statement that security plays an important role in allowing or requiring executives to use aircraft for personal reasons.

WSJ Links
Corporate Jet Set: Leisure vs. Business (article)
WSJ Jet Tracker (database)

PDF:  You Are Now Free to be Tracked about the Country