Does Owning a Corporate Jet Make Sense?

The company owns a corporate jet to fly the CEO and other top executives to meetings around the globe.  Does it make sense financially, or is it one of those corporate perks that should be abolished?  New research by NYU Professor David Yermack suggests that shareholders should think twice about investing in a company with its own jet, or even worse, its own fleet of jets.   Yermack's latest study, published in the Journal of Financial Economics shows that, "Average shareholder returns underperform market benchmarks by more than 4% annually, a severe gap far exceeding the costs of resources consumed."   4% is a significant number.   What's going on there?  Of course, many explanations exist for why this underperformance might exist.   One interesting tidbit in the study... companies with jets also tend to have CEOs with long-distance golf club memberships.   I'll let my readers noodle over that interesting finding for a moment. 

Personal Use of Corporate Jets

The Wall Street Journal ran a major story today on the personal use of corporate aircraft by company executives.   They found that many CEOs spend a great deal of time using their corporate jets for personal travel.   Many executives consider the use of a corporate jet a major perk.   In my view, corporate jets can serve a very useful function in terms of allowing executives to travel much more efficiently than if they had to use commercial flights.   Some use of the jet for personal reasons may be appropriate as well, since the line between personal and business travel can be blurred at times.  However, it appears that some executives may be abusing this perk.  In addition, SEC rules require the honest reporting of personal usage by executives.  Moreover, personal use of a corporate jet is a taxable benefit.  If companies, as the Wall Street Journal suggests, are under-reporting the personal use of these jets, then shareholders and taxpayers rightfully should be upset.