Reply #61: The corporate jet: Necessity or ultimate executive toy?

[54anickel]

http://www.usatoday.com/money/companies/management/2005-04-26-corp-jets-cover_x.htm

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Virtually all CEOs' personal flight costs were paid by their companies. Since the IRS values personal flight time as taxable income, many companies also covered CEOs' flight-related taxes. For example, eBay spent $229,145 for CEO Meg Whitman's personal plane use in 2004 and what the online auctioneer characterized as a $128,390 "bonus" to cover her taxes on the imputed income.

The swelling numbers reflect heightened post-Sept. 11 security concerns, a thriving business-jet market, a tax code that allowed executives to fly at ultralow prices and companies to claim tax breaks, and more broadly, growing acceptance by corporate boards that personal flight time is a perk necessary to keep CEOs happy. Big users:

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"It's clear companies giving this perk perform poorly, and there's no reason to think that's changed," he says. "There may be a justifiable business purpose, but there are lots of companies that wouldn't have bought planes in the first place if the CEO didn't have his eye on it for the toy factor."

Setting a tone

With executive compensation skyrocketing, corporate governance experts say shareholders shouldn't foot the bills. "When setting the tone, boards need to ensure there isn't one playbook for executives and another for the rank and file," says Eleanor Bloxham of The Value Alliance. "Why pay for perks CEOs could easily buy for themselves?"

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Under a provision of the 2004 American Jobs Creation Act, companies lost the ability to deduct the difference between the imputed income value to CEOs and more accurate costs of their flights, including fuel, crew expenses and landing fees. The IRS hasn't determined what formula it will require companies to use to report more accurate costs. Some firms already account for higher incremental charges, but that methodology "severely understates actual costs," says David Cay Johnston, author of Perfectly Legal: The Covert Campaign to Rig Our Tax System to Benefit the Super Rich — and Cheat Everybody Else.

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