Textron board members under fire for supporting Cessna
Two longtime Textron board members could be voted out April 22 at a shareholders meeting for supporting the personal use of business jets made by their own subsidiary, Cessna Aircraft Co. Textron countered that both personal and business uses support Cessna, and plans a letter-writing campaign to save the two board members.
The complaint against the two comes in a report from RiskMetrics Group (RMG), a firm with revenues of $300 million a year and 1,000 employees that advises institutional investors. The advice? Fire Lawrence K. Fish, on the board for 10 years and the lead director of the board, and Joe T. Ford, a board member for 11 years and a member of the nominating committee. There were two main reasons. RiskMetrics said Textron offered an excessive hiring package to COO Scott Donnelly, and charged that the company has “ongoing excessive personal use of company aircraft.”
The report indicates Textron CEO Lewis Campbell received nearly a half-million dollars for personal aircraft use in fiscal 2007, and nearly $600,000 in fiscal 2008, while at most companies only $76,000 is provided yearly. The RiskMetrics report does not say if any of the other companies build corporate aircraft that they want to showcase.
A Textron representative issued this statement regarding the RiskMetrics report written by RiskMetrics analyst Oguz Tolon. “As the parent company of Cessna Aircraft, a critical part of Textron’s profitability comes from the manufacturing and servicing of Cessna business jets. Although the company strongly believes that use by Textron executives for both private and business use increases their productivity and provides a competitive talent attraction and retention advantage, it also serves as an extremely important example to showcase the real-life efficiencies and other benefits to potential customers. It is therefore not surprising that the company may rank higher than others with respect to our spending in this area. We not only leverage the use of business jets as a strategic advantage, it is a core part of our business as an aircraft manufacturer.”
In response to the Textron argument, RiskMetrics said, “RMG does not concur with the argument that excessive personal use by the company’s CEO is important to sell airplanes.”
Tolon said personal usage of corporate aircraft is becoming a concern at many companies. Tolon was asked to expand on his objections. “It should be clear that it is not the business usage of a company’s aircraft by certain executives that may be viewed as stealth compensation by our institutional clients; rather, it is the personal usage provided as a perquisite in many cases,” Tolon said in an e-mail. “RMG provides context to a CEO’s personal usage by stating statistics from our research across sectors. In this case, the amounts referred reflect the median value of perquisites for S&P 500 Industrial chief executives, which fell by approximately 31 percent from 2006 to 2007. Additionally, recent findings surveyed at CEOs of Fortune 100 companies also showed a continuing declining trend on cost associated on these perquisites, approximately a 10-percent year-over-year decrease in value provided specifically for aircraft usage and financial planning perquisites from 2006 to 2007. It should also be noted that CEO Campbell’s personal usage of the company’s aircraft in fiscal year 2008 ($590,417) is more than five times the median usage at Fortune 100 companies in FY 2007 of $109, 743. The increase in his ‘personal’ usage from 2007 to 2008 is also contrary to the general trend in the company’s peer group. These are some of the considerations contained in our Poor Pay Practices policy.”
April 15, 2009