Corporate Jets become Private Golf Shuttles for Top Execs
By Mark Maremont: The Wall Street Journal
Oct. 9, 2005
Pittsburgh's weekend weather forecast on Friday, Jan. 28, called
for light snow and temperatures in the 20s and 30s, but that didn't
keep Raymond LeBoeuf, then chief executive of PPG Industries Inc., from
playing golf. At 4 p.m., a Hawker 800 jet owned by the paint and glass
company carried Mr. LeBoeuf from a small Pittsburgh airport to balmy
On Sunday, Mr. LeBoeuf played an 18-hole round of golf in Naples
at the Hole In The Wall club, an invitation-only private club, whose
entrance is a small, discreetly marked opening in a large hedge. His
score was an impressive 82. The PPG jet flew Mr. LeBoeuf back to the
company's Pittsburgh headquarters early on Monday.
The following weekend, Mr. LeBoeuf, 58 years old, again flew to
Naples, where he owns a home valued at more than $5 million. That time
he improved his score to 77 at the Naples club, which has a five-year
waiting list to join. In all, Mr. LeBoeuf, who retired in July,
traveled to Naples on PPG's two corporate jets on eight weekends
between late January and April. He played golf on each visit, and his
scores, like those of many executive golfers, are posted on a database
operated by the U.S. Golf Association.
At PPG, spokesman Jeff Worden confirms that Mr. LeBoeuf was
aboard the company jet on the eight weekend trips to Naples, "where he
was in the process of establishing a new primary residence in
preparation for his retirement." He adds that PPG has a security plan
"requiring" the company's chairman and president to use corporate
aircraft for personal as well as business trips. Mr. LeBoeuf, who was
paid $4 million in salary and bonus last year, says that "what I did
there was consistent with corporate policy and the desires of our
There are thousands of corporate aircraft flying the skies over
the U.S. Most companies say these planes are necessary to conveniently
and securely transport employees to distant facilities or meetings. Top
executives "are really 24-hour-a-day, seven-day-a-week people," notes
Mike Nichols, an official with the National Business Aviation
Association, a trade group. "These are really flying offices."
But a comparison of golf scores and flight records, some of
which are available from commercial aviation-data services, shows that
companies also use their jets for another purpose: as airborne
limousines to fly CEOs and other executives to golf dates or to
vacation homes where they have golf-club memberships.
At some companies, hundreds of flights in recent years have
involved golf, played either for business, pleasure or both. Among
companies whose top executives have flown on corporate jets to golf
destinations are Alltel Corp., Motorola Inc., General Dynamics Corp.,
McKesson Corp., Verizon Communications Inc., SLM Corp. (Sallie Mae),
U.S. Steel Corp., Cintas Corp., PNC Financial Services Group Inc. and
National City Corp.
Companies usually pick up the tab for personal travel on their jets, so
each trip can cost shareholders tens of thousands of dollars. The full
cost of these flights can be hard to unravel. Under Securities and
Exchange Commission regulations, companies must disclose the annual
so-called incremental cost of personal travel by top executives once
the cost of total perquisites exceeds either $50,000, or 10% of an
executive's annual salary and bonus. Companies typically define
incremental cost as the added expense of a given flight -- such as
fuel, landing fees and a crew's hotel costs.
This method of disclosure can understate the cost of flying
chief executives to vacation destinations because it excludes expenses
such as crew salaries, many maintenance charges and the purchase price
of the plane. The business jets favored by many public companies cost
$15 million to $40 million to buy and roughly $3,000 to $7,000 to
operate for an average hour, according to flight-cost data from Conklin
& deDecker Aviation Information, an aviation research and
consulting firm based in Orleans, Mass. The SEC is considering
switching to a new disclosure formula that would reflect these broader
costs. If adopted, it could double or triple the flight costs
that companies must disclose.
For top executives, this all adds up to a bargain. Typically,
they pay only the income tax assessed on the value of personal flights.
The tax usually amounts to just a few hundred dollars per flight, and
is determined by a complex IRS formula that takes into account the
distance traveled and the employee's position in the company.
Alltel's four jets have landed more than 165 times over the last
four years at an airport in Augusta, Ga., according to a database
containing flight information filed with the Federal Aviation
Administration. The airport is near the Augusta National Golf Club,
which hosts the annual Masters Tournament. Joe Ford, Alltel's chairman,
and his son Scott Ford, the company's chief executive, are members of
the golf club.
Andrew Moreau, a spokesman for Alltel, a big telephone company
based in Little Rock, Ark., declines to comment on the Augusta trips.
He says company planes are sometimes used to travel to destinations for
"customer entertainment." The "policy does permit certain usage for
personal purposes," he says, and executives pay taxes on the value of
those flights. Alltel also owns a local cellular company in the Augusta
David Yermack, an associate professor at New York University's
Stern School of Business, found in a research paper that CEOs who
belong to golf clubs far from their company's headquarters tend to be
big users of their company planes. The publicly disclosed cost of
aircraft use for these CEOs is two-thirds higher, on average, than for
CEOs who have disclosed air travel but are not long-distance golf-club
members, according to Mr. Yermack, who presented the paper on
corporate-aircraft use at the annual meeting of the American Finance
Association this year.
A very good golfer shoots at "par," roughly 72 strokes for an
18-hole course, while professionals like Tiger Woods typically score
lower. To facilitate competition between golfers of unequal skill,
players establish handicap indexes, which are calculated from recent
scores. As part of a peer review process, to make sure golfers don't
fudge their scores, the golfing records of many players are available
on Internet sites operated by the USGA and other golf associations and
services. The Wall Street Journal compared the golf data on these sites
with information about flight plans to figure out when company planes
were flying top executives to golfing destinations.
Golf databases also list clubs to which players belong.
Sometimes those clubs are far from a chief executive's corporate home.
Edward Zander, CEO of Motorola, works at the company's Schaumburg,
Ill., headquarters. But he's listed in the USGA database as a member of
The Preserve Golf Club in Carmel, Calif.
Equity membership in the club, one of Golf Digest's top 100
courses in the U.S., is limited to 300 owners of property in the
surrounding development. Mr. Zander and his wife paid $1.9 million for
their lot in 2000, and have built a 9,146-square-foot house and
1,363-square-foot garage, with a pool, two spas, a guest house and a
caretaker's house, according to county records.
When he joined Motorola last year, Mr. Zander agreed to relocate
from the Silicon Valley area, where he had previously been president of
Sun Microsystems Inc. Motorola gave him "reasonable" access to company
jets, including a minimum of 100 hours a year of personal time,
according to his employment agreement.
Motorola then commissioned a security study and concluded that
Mr. Zander should be required to use company aircraft whenever he
flies, effectively making the 100-hours-a-year agreement moot.
So far this year, Mr. Zander has recorded 10 golf scores at the
Preserve club, mostly on weekends, although two were on Fridays. Before
and after each of those games, Motorola jets flew to and from the
nearby Monterey, Calif., airport.
Typical was a journey that began on Thursday, July 28, when a
Motorola-owned Dassault Falcon 900 traveled from a Chicago-area airport
to Monterey, according to a flight database. Mr. Zander, who recently
sported a 16.7 handicap, shot a 93 on Friday and a 100 on Saturday. The
jet returned to Chicago later that day.
According to Conklin & deDecker, the round-trip cost of that
trip would be more than $46,000, based on an average cost per mile for
operating such a jet. That would include the price of about 2,400
gallons of fuel, maintenance, crew salaries and a market depreciation
rate to cover the plane's purchase price. Mr. Zander will likely pay
about $600 to $1,200 in taxes for the trip.
In a statement, Motorola spokeswoman Jennifer Weyrauch said the
company's board believed that allowing personal use of company aircraft
was "appropriate to secure a CEO like Mr. Zander" and that Motorola
fully discloses his jet usage in its proxy. Mr. Zander "frequently
combines personal time and business during his trips to California,"
wrote Ms. Weyrauch.
Mr. Zander made $6.1 million in salary and bonus in 2004, and
was granted an additional $9.1 million in restricted stock plus 2.6
million stock options.
Charles Elson, director of the Weinberg Center for Corporate
Governance at the University of Delaware, calls it "disgusting" for a
company to guarantee its CEO 100 hours of free personal flight time. "A
corporate aircraft isn't supposed to be a shuttle to a vacation home,"
says Mr. Elson. "We pay CEOs enough. They can afford to pay to fly to
their vacation homes."
Some CEOs belong to golf clubs in more than one distant location
and use corporate jets to get there. David Daberko is chief executive
of National City, the eighth-largest U.S. bank, which is headquartered
in Cleveland and operates primarily in the Midwest. The bank's two jets
make frequent trips to Palm Beach, Fla., and Martha's Vineyard, Mass.,
where according to USGA records Mr. Daberko belongs to golf clubs.
Over three months starting in late January, National City jets
flew at least nine times to Florida, mostly to the Palm Beach area,
where Mr. Daberko owns a 3,450-square-foot house adjacent to the Lost
Tree golf club. Mr. Daberko, who recently had a 7.0 handicap, recorded
10 rounds of golf over that period, mostly at Lost Tree but also at the
nearby Seminole golf club, one of Golf Digest's top 10 U.S. courses.
One trip started the morning of Thursday, March 17, when a
bank-owned jet flew from Cleveland to Palm Beach, according to a flight
database. Mr. Daberko recorded scores of 85 and 87 at the Lost Tree
course on Friday and Saturday, also listing a second Saturday round at
another course, according to the USGA database. The jet returned to
Cleveland on Sunday afternoon, March 20.
This summer, the same jet made a series of trips to and from
Martha's Vineyard, where Mr. Daberko belongs to the Vineyard Golf Club.
He played there nine times during July and August.
Mr. Daberko earned $3.1 million in cash compensation last year.
He was granted $1.7 million in restricted stock and 420,000 options.
Kristen Baird Adams, a National City spokeswoman, says Mr.
Daberko is required by the board to use the company's jets for all
travel. His trips this year have been "primarily for business
purposes," she says, adding that Mr. Daberko has taken seven personal
round-trip journeys on National City jets this year. Four were to
Florida and two were to Massachusetts. Mr. Daberko's personal travel,
she says, is "reported in full compliance with SEC and IRS rules." She
says that National City reimburses Mr. Daberko for any extra taxes
stemming from his personal flights.
Even retired CEOs use company planes for golf outings. Thomas H.
O'Brien retired as CEO of PNC, a large Pittsburgh bank, in 2000, and
left the chairman's job in May 2001. He's still an outside director --
and a member of the Augusta National golf club.
PNC's jets have flown to Augusta more than 55 times since late
2001, according to database records. A company spokesman confirms that
Mr. O'Brien was aboard on some occasions, and notes that company policy
allows outside directors to use the plane "if it is for strictly
An even more frequent destination for PNC's jets is Vero Beach,
Fla., where Mr. O'Brien and James Rohr, PNC's current chairman, own
beachfront homes. Both are listed in the USGA database as members of
the Redstick Golf Club, an exclusive, four-year-old club in Vero Beach
with a Spanish Colonial-style clubhouse featuring stuffed leather
chairs, a moose head on a wall and a membership limited to men.
PNC's two jets have landed in Vero Beach more than 100 times in
the past four years. Sometimes the jets have shuttled between Vero
Beach and Augusta.
According to the company's most recent proxy, PNC's board in
2004 established a $50,000 annual cap on the incremental costs to the
company of providing perquisites to any individual executive, including
personal jet travel. The PNC spokesman, Brian Goerke, said Mr. Rohr
reimburses the company for the "incremental costs" of his flying beyond
the limit. Those costs, such as fuel and other items related to an
individual flight, are generally less than the total cost of operating
a private plane if fixed costs were included. (The incremental cost of
flying round-trip from Pittsburgh to Vero Beach on a Hawker 800 jet
like those flown by PNC would be about $5,450, less than half of the
$12,780 cost of that same trip using average per-mile expenses,
according to Conklin & deDecker data.)
Mr. O'Brien didn't return phone calls seeking comment.
At Cintas, the nation's largest provider of industrial laundry
services, chairman and founder Richard T. Farmer is known for espousing
frugality. "We have a Spartan attitude about our business," Mr. Farmer
wrote in a 1999 edition of "The Spirit is the Difference," a book
distributed to Cintas employees spelling out Mr. Farmer's vision of the
company's culture. "We are not concerned with the frills of expensive
restaurants, fancy offices or luxurious accommodation. We avoid
Mr. Farmer is on the Forbes 400 list of the U.S.'s richest
people and his personal wealth is estimated at $1.4 billion. In
addition to his home near Cintas's headquarters in
Cincinnati, Mr. Farmer owns a 7,357-square-foot waterfront house on Key
Largo, Fla., valued for tax purposes at nearly $6 million. During the
winter, he frequently plays at the Card Sound Golf Club on Key Largo
and is a member of the nearby Ocean Reef Club.
Since late 2001, two Cintas-owned corporate jets have landed
about 100 times at an airstrip on Key Largo owned by the Ocean Reef
Club. Between November 2004 and May, the planes landed there two dozen
times. According to USGA records, Mr. Farmer played golf on Key Largo
15 times between February and early May. When the weather turned warmer
in Ohio, he began playing at the Camargo Club in Cincinnati.
Pamela Lowe, a Cintas spokeswoman, says Key Largo is Mr.
Farmer's "primary residence," and "a significant portion of his travel
to and from his Florida home is to attend company management meetings"
and other business functions. She adds that personal use of the
corporate aircraft "is a component of the total annual compensation
package for Mr. Farmer," and appropriate taxes are paid.
Each round-trip from Cincinnati to Key Largo aboard the
company's Bombardier Challenger 600 jet costs more than $18,000,
according to the Conklin & deDecker estimate of average per-mile
costs for such a plane.
General Dynamics, the defense contractor, owns Gulfstream
Aerospace, one of the leading makers of business jets. The Falls
Church, Va., company has its own fleet of business jets, including a
Gulfstream V sometimes used by CEO Nicholas Chabraja.
Between late January and late April of this year, General
Dynamics planes landed at the Fort Myers, Fla., airport nine times,
often flying there from Washington on Friday afternoons. Fort Myers is
the nearest major airport to Sanibel Island, where Mr. Chabraja belongs
to a golf club and until July owned a vacation house. Mr. Chabraja
played golf on Sanibel 10 times between Jan. 30 and April 23, according
to USGA records.
Kendall Pease, a General Dynamics spokesman, confirms that Mr.
Chabraja was on board the plane on eight of the flights to Fort Myers
but says only five of the trips were personal.
Mr. Pease says Mr. Chabraja is authorized by the board to use
the aircraft for personal reasons, and the incremental cost is
disclosed in the company's proxy. "It's part of his compensation," says
Mr. Pease. The spokesman calls Mr. Chabraja's ability to travel on a
company jet "an extremely important business tool, because it gives him
security and flexibility at all times."
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