The latest example of tin ears in the so-called c-suites and in board rooms comes courtesy of reporter Elizabeth Holmes in today’s Wall Street Journal. The retailer Abercrombie & Fitch Co. agreed to pay its CEO $4 million to limit his personal use of the company’s jet.
That’s right, CEO Michael Jeffries gets a lump sum payment of $4 million to induce him to only fly in the corporate jet for personal trips up to $200,000 a year.
Jeffries’ prior employment agreement gave him unlimited personal use of the corporate jet. It’s a perk he seems to have put to good use. His personal travel on the jet in 2008 tallied about $1.1 million, the Journal said.
It’s simply hard to imagine why a board of directors of a public company would find it necessary to put unlimited personal use of a corporate jet into a CEO’s employment agreement.
One more piece of context supplied by the Journal article. Jeffries’ pay package in 2008, the last year for which data are publicly available, totaled $15.9 million.
Think about how this news is going to go over with Abercrombie & Fitch employees, customers and shareholders. Not to mention the broader public, where the deep recession has stirred significant resentment against high CEO pay, especially in situations where the pay doesn’t seem tied to company financial performance.
Abercrombie’s financial performance isn’t even the issue here, in this blogger’s view. I’ve maintained many times that what upsets many people is not so much high pay at top jobs when companies are performing, but the perks granted alongside that high compensation, perks that are typically unavailable to others.
That’s the tax “gross ups,” the easy terms on a mortgage, the country club payments. The view of the resentful, understandably, is that if you are making a lot of money you can pay your own taxes like everyone else.
Same thing applies here. With nearly $16 million in compensation in 2008, it doesn’t seem like too much to ask the CEO to limit his personal, not business use, of the corporate jet, and not have to pay big dollars for that adjustment.