Boston, MA 10/21/2013 (wallstreetpr) – At a time when most companies are trying to cut down on expenses to improve profitability, Cisco Systems, Inc. (NASDAQ:CSCO) CEO John Chambers has been using his private jet for business travel and then billing the company for compensation.
According to documents submitted to the Securities Exchange Commission, the CEO has sent bills to the company in 2013 totaling $2.8 million for expenses related to the use of his jet and since 2009 he has filed claims amounting to an estimated $11.1 million.
There does not seem to be a specific IRS policy for private jet usage like the one which governs car mileage reimbursements and all an executive needs to ensure is that the charge being submitted to the company is not more than it would have cost to get a private chartered jet or use one from the company’s private fleet. To put things into perspective, a one hour chartered flight from San Jose to California costs approximately $21,000 for 4 passengers.
Most companies only tell their shareholders how much executives spend while using corporate jets for personal travel so it is almost impossible to see how Cisco is benefitting from the existing arrangement. But figures from within the industry show that there is a great disparity between what Cisco pays and what other companies are spending. At IBM, for example, CEO Ginni Rometty is always required to use jets provided by the company, even when the reason for travel is not business related and documents filed with the SEC show that in 2012 she spent $304,376 using corporate jets for personal travel.
Executives certainly deserve the perks of their position and considering how much they travel on company business, they should be able to do so in style and comfort. However, this should not become a burden on the company and although $2.8 million might be considered a drop in the bucket at Cisco, they may want to revise the current arrangement with the CEO if it is determined to go against the best interest of the company and its shareholders.
