AUSWR
The Association of U S West Retirees
 

 

 

Qwest jet-set perk questioned
New CEO's use of corporate plane extends to wife, child
By Jeff Smith
Rocky Mountain News
Thursday, September 6, 2007


The personal use of a corporate jet by new Qwest CEO Ed Mueller's wife and stepdaughter is rare even among chief executive perks and could cost the Denver telco up to $600,000 by one estimate.  The perk, disclosed in a regulatory filing Friday, has been sharply criticized by a number of customers, employees, retirees and corporate watchdogs.

"I just think it's wrong when executives start getting perks that set them up to look like a royal king or royal queen," said Lynn Turner, former chief accountant for the Securities and Exchange Commission.  "It looks bad to employees, to investors, to the public in general."

Turner, who now sits on the board of two publicly held companies, said CEOs should take care of personal expenses out of their own pocket, considering how much they are paid.

Mueller, a Bell telephone veteran and formerly CEO of upscale retailer Williams-Sonoma, is receiving a salary of $1.2 million, with a target bonus of $2.4 million, stock awards worth about $15 million, temporary housing expenses of $5,000 a month and other benefits.

The aircraft perk disclosed Friday allows Mueller's wife and stepdaughter to travel alone on the corporate jet between the family's California home and Denver through June 30, 2008.

Another provision in his employment contract allows Mueller and family members to use the corporate jet for "reasonable" personal use, subject to review by a board committee.

Corporate jets have been used by CEOs for years, but Turner said personal use expanded over time because there was no transparency.  As top executives heard what their peers were doing, "before long, there's a pretty good herd of buffalo running together on it."

But the SEC's new disclosure requirements are shedding light on the practice, and this week The Corporate Library published a report on the personal use of corporate jets, gleaned from a study of 215 CEOs of publicly held companies.  Qwest wasn't one of those studied.

The results:  More than half of the CEOs, 53.9 percent, used corporate aircraft for "nonbusiness" use.  The median cost of the perk in fiscal 2006 was $182,929, or $220,862 with tax reimbursements included.

But spouses of only 28 of the 215 CEOs also were eligible to use the corporate jet for personal reasons.

Based on the disclosures at least, it appears as if the perk given to Mueller is comparatively rare, said Paul Hodgson, senior research associate for The Corporate Library, a research group that examines corporate governance and compensation issues.

Qwest spokesman Bob Toevs said last week that since Qwest is requiring Mueller to use a corporate jet for security reasons, the telco believes it should accommodate "reasonable personal use."

Toevs said allowing Mueller's wife and stepdaughter to fly in the corporate jet unaccompanied by Mueller "reflects a greater appreciation for his family situation as his (high school-age) daughter wraps up her current schooling in California."

He declined additional comment Wednesday.

But Hodgson, like Turner, said it would seem only "common sense" to require executives to pay for such personal travel, since the mother and daughter could fly commercially instead.

Michelle Leder, who writes the blog footnoted.org about little-noticed details in corporate regulatory filings, reported this week that the aircraft perk could cost Qwest as much as $600,000 based on the charter rates of a Falcon 2000 twin-engine business jet.

Leder received her information from an East Coast aircraft charter company.  The company told the Rocky Mountain News that it based its estimate on 25 weekend flights, with the corporate jet permanently based in Denver.  The company said it took into account some instances where Mueller, who is buying a home in Denver, might combine business with weekend trips to the family's California home.

The total cost could turn out to be much lower if Mueller's wife and stepdaughter make only a handful of trips to Denver.

By comparison, they probably could make 25 weekend trips between California and Denver on commercial airlines for less than $20,000 combined.

While Mueller's perk is a new twist for Qwest, some view it as more of the same.

Former Qwest CEO Dick Notebaert and his wife, and several other top executives, were allowed "reasonable" personal use of the corporate jet.  Notebaert alone racked up $331,873 in costs in 2006, excluding tax reimbursements.

Qwest also has allowed the spouses of directors to occasionally accompany them when the directors fly to Denver for meetings.

Nelson Phelps, executive director of the Association of U S West Retirees, said the group's Washington attorney also spotted the disclosure Friday, and Phelps started getting calls and e-mails from disgruntled retirees.

"It bothers us.  If you look at most CEOs in America, they don't have that privilege," Phelps said.  "I understand the reasoning for the daughter to come back and forth, but he (Mueller) is making plenty of money.  There seems to be a lack of strict governance by this board, and it shows retirees that they are second-class citizens when it comes to benefits."

Turner has long maintained Qwest should cleanse itself of all directors from the scandal-ridden Joe Nacchio era.

Qwest's compensation committee includes Frank Popoff and Linda Alvarado, who were on Qwest's board during Nacchio's last years.

"Here's a company where employees are important, and there's been a struggle to (re)build that morale," Turner said.  "It's kind of like putting a finger in their eye."

Flying figures

More than half of U.S. chief executives used corporate jets for personal use last year, according to a study of 215 CEOs by The Corporate Library. The median cost of the perk was $182,929.

Spouses of 28 of the 215 CEOs also were allowed to use corporate aircraft for personal use.

Qwest's new CEO Edward Mueller, his wife and teenage stepdaughter are being allowed use of the corporate jet for personal reasons. The wife and daughter are being allowed to fly unaccompanied by Mueller between Denver and California, where the stepdaughter is finishing high school.

smithje@RockyMountainNews.com or 303-954-5155

http://www.rockymountainnews.com/drmn/tech/article/0,2777,DRMN_23910_5691030,00.html