The new SEC compensation disclosure regulations include significant changes regarding benefits and perquisites. The updated rules, which become effective for companies with fiscal years ending on or after December 15, 2006, will consolidate perquisite disclosure into a single column of the Summary Compensation Table and will lower the reporting threshold for aggregate annual perquisites from $50,000 (or 10 percent of cash compensation) to $10,000. This change, in addition to the requirement for clearer definitions of perquisites, will provide a wealth of new information on the “other” compensation received by executives.

Among the perquisites available to executives, personal use of corporate aircraft has long been among the most visible and valuable. Equilar recently completed a quantitative and qualitative examination of Fortune 500 CEO aircraft perquisites using data derived from fiscal year 2004 and 2005 proxy filings. The following article provides a review of CEO aircraft perquisites at Fortune 100 companies and is a subset of Equilar’s 2006 Fortune 100 Executive Perquisites report.

Value and Prevalence of CEO Aircraft Perquisites

From 2004 to 2005, the median value of Fortune 100 chief executive aircraft perquisites increased by 21.7 percent, rising from $89,246 in 2004 to $108,579 in 2005. These values include only the cost of travel associated with personal travel on corporate owned or leased aircraft. While this change is significant, it should be noted that part of the increase in the reported value of CEO aircraft perquisites is driven by a shift from the Standard Industry Fare Level (SIFL) methodology to the incremental cost methodology for valuing the cost of air travel.

Along with an increase in the reported value of CEO aircraft perquisites, the number of companies disclosing the personal use of corporate aircraft rose, climbing from 59.4 percent of public Fortune 100 companies in 2004 to 68.4 percent of companies in 2005. Most importantly, among companies disclosing the use of corporate aircraft by CEOs, the prevalence of companies disclosing the value of this benefit increased from 82.5 percent in 2004 to 93.8 percent in 2005.

The following chart displays recent trends in the reported value of CEO personal use of corporate aircraft and the prevalence of CEO aircraft perquisite disclosure among public Fortune 100 companies.

Aircraft Usage Policies

In addition to the SEC’s more stringent reporting requirements for the aggregate value of perquisites, the new compensation disclosure regulations call for improved narrative disclosure of perquisites. These disclosures, whether in the new CD&A or footnotes to the revised Summary Compensation Table, should provide a more accurate description of the nature of executive perquisites and the various policies governing benefits and perquisites. Given the high level of scrutiny on CEO aircraft usage, many companies have already begun to provide a wealth of information on their policies for managing the use of corporate aircraft by executives. Several disclosure examples are provided below to illuminate key corporate aircraft policies:

• Policies Limiting Personal Use of Corporate Aircraft
  
  Marathon Oil Corp.
  DEF 14A filed on March 6, 2006
  Link to Filing
  
  "The amounts shown in this column reflect the personal use of Company aircraft by the officers. In general, officers are not allowed to initiate personal trips on corporate aircraft. However, officers are permitted to invite their spouse or other guests to occasionally accompany them on business trips when space is available. When the spouse or guest’s travel does not meet the IRS standard for “business use,” the cost of that travel is imputed as income to the officer."
  
  Goldman Sachs Group Inc.
  DEF 14A filed on February 27, 2006
  Link to Filing
  
  "We make available for business use to certain of our Named Executive Officers private aircraft in which Goldman Sachs owns a fractional interest. Our general policy is not to permit employees, including Named Executive Officers, to use such aircraft for personal use. During fiscal 2005, there were limited instances in which certain of our Named Executive Officers brought personal guests as passengers on business-related flights. In such cases, the Named Executive Officers paid Goldman Sachs an amount equal to the greater of: (a) the aggregate incremental cost to Goldman Sachs of the usage by such guests; or (b) the price of a first-class commercial airline ticket for the same trip."



• Reimbursement Policies
  
  Prudential Financial Inc.
  DEF 14A filed on March 29, 2006
  Link to Filing
  
  "For security purposes, Mr. Ryan uses Company aircraft for air travel. Mr. Ryan reimburses the Company for the incremental cost of personal use of Company aircraft. Any personal use of Company aircraft by any of the other Named Executives would be subject to the same reimbursement requirement."
  
  Abbott Laboratories
  DEF 14A filed on March 24, 2006
  Link to Filing
  
  "In 2005, Abbott entered into time-sharing lease agreements with those of its officers who were required by Abbott policy to use corporate aircraft for all air travel when practicable. Under these agreements for non-business related flights, Abbott leases the aircraft and provides a qualified flight crew to the officer pursuant to federal aviation regulations, and the officer reimburses Abbott for its cost of the flight, up to the higher of the cost of first-class airfare or the amount calculated for personal use of aircraft under Department of Treasury regulations. The following amounts were reimbursed by the officers to Abbott under their agreements for flights in 2005: M. D. White, $61,892; J. M. Leiden, $73,061; and R. A. Gonzalez, $68,257."



• Change in Aircraft Perquisite Valuation Methodology
  
  Marathon Oil Corp.
  DEF 14A filed on March 6, 2006
  Link to Filing
  
  "The amounts shown for 2005 reflect the variable costs of personal flights taken by the respective officers or their guests. Variable costs were calculated based on a methodology that reflects average costs of operating the aircraft, such as fuel costs, trip-related maintenance, crew travel expenses, trip-related fees and storage costs, on-board catering and communications charges, and other miscellaneous variable costs. Fixed costs that do not change based on usage such as pilot compensation, the purchase or lease costs of the aircraft, and maintenance not related to travel are excluded. The amount shown in this column for 2003 is based on the Company’s historical approach of reporting the income imputed to the officer for personal use of Company aircraft based on the Standard Industry Fare Level (“SIFL”) rates and related terminal charges, as allowed by the Internal Revenue Code. It was not administratively feasible to recalculate the 2003 amounts using the variable cost method described above."
  
  Fedex Corp.
  DEF 14A filed on August 15, 2005
  Link to Filing
  
  "Beginning with this proxy statement, personal use of corporate aircraft is valued based on the aggregate incremental cost to FedEx on a fiscal-year basis. The incremental cost to FedEx of personal use of corporate aircraft is calculated based on the variable operating cost to FedEx, which includes the cost of fuel, aircraft maintenance, crew travel, on-board catering, landing fees, ramp fees and other smaller variable costs. Because FedEx corporate aircraft are used primarily for business travel, fixed costs that do not change based on usage, such as pilots’ salaries and purchase and lease costs, are excluded from this calculation."



• Security Policies
  
  Exxon Mobil Corp.
  DEF 14A filed on April 12, 2006
  Link to Filing
  
  "For security reasons, the Board requires the Chairman and President to use company aircraft for both business and personal travel. Although we consider these costs a necessary business expense rather than a perquisite, in line with SEC guidance, the table includes the amounts attributable to the Chairman and President's personal aircraft usage. The incremental costs were $89,925 in 2005, $89,246 in 2004, and $79,711 in 2003 for Mr. Raymond; and $36,724 in 2005 and $54,559 in 2004 for Mr. Tillerson. Incremental cost for this purpose is based solely on incremental operating cost and does not include capital costs of the aircraft, since the Company would incur these capital costs anyway. Messrs. Raymond and Tillerson are taxed on the imputed income attributable to such personal aircraft use and do not receive tax assistance from the Company with respect to those amounts."

To learn more about Equilar’s Executive Perquisites report and database, please contact Equilar by phone (877.441.6090) or via e-mail (info@equilar.com).