Many big tech companies, like HP and IBM, keep fleets of private jets to fly their executives around in convenience, safety and style. But at Cisco, CEO John Chambers works it in reverse.
He owns his own jet and then he sends Cisco a bill when he uses it for work, which he presumably does a lot.
In 2013, he billed Cisco $US2.8 million in jet expenses, according to forms filed with the SEC. Unlike car mileage, there doesn’t seem to be an IRS standard when reimbursing for your private jet. Chambers just has to make sure that his expense rate isn’t higher than what it would cost to hire a private chartered jet.
That’s not hard to do. It will cost you $US21,000 to charter a 4-passenger plane for an hour to fly from San Jose to L.A. on a JetSuite private charter (non-member rate).
Blogger Brad Reese calculates that since 2009, Chambers has billed Cisco $US11.1 million in private jet expenses.
$2.8 million certainly isn’t a lot of money by Cisco’s standards. But just for kicks, we looked at what it would cost to fly first-class on a commercial airline (United), from San Jose, California (where Cisco is based) to Bangalore, India (where Cisco has an R&D facility).
For $US2.8 million, one person could fly 175 times, first-class to Bangalore at that rate. Or four people (a small entourage) could fly 43 times.
It’s hard to tell if Cisco is getting a sweet deal by paying for Chamber’s business travel on his private jet.
Most companies only disclose the reverse situation. They tell shareholders how much the company spent when executives use the corporate jets for personal travel. This is included their total compensation numbers, so presumably they pay taxes on the benefit (though many companies also pay for their executives to get help preparing their taxes.)
For instance, IBM says that its CEO, Ginni Rometty, must use IBM’s jets at all times, even for personal travel, for safety reasons, according to forms filed with the SEC. In 2012, she spent $US304,376 for personal travel on the corporate jets.