Flights of Fancy: Corporate Jets, CEO Perquisites, and Inferior Shareholder Returns

Abstract

This paper studies perquisites of major company CEOs, focusing on personal use of company planes. For firms that have disclosed this managerial benefit, average shareholder returns under perform market benchmarks by more than 4 percent annually, a severe gap far exceeding the costs of resources consumed. Around the date of the initial disclosure, firms’ stock prices drop by an average of 1.1 percent. Regression analysis finds no significant associations between CEOs’ perquisites and their compensation or percentage ownership, but variables related to personal CEO characteristics, especially long-distance golf club memberships, have significant explanatory power for personal aircraft use.