September 28, 2017 / 8:18 PM / a year ago

Breakingviews - Cox: Where are the taxpayers' private jets?

NEW YORK (Reuters Breakingviews) - Most savvy American companies learned long ago that hangars full of private jets for personal use by executives paint an easy target for investor activists. So it’s puzzling to see Donald Trump’s cabinet members flying in the sort of high style formerly associated with tin-eared corporate chieftains. It makes the next personnel decision for the president, famous for his “you’re fired” catchphrase, the easiest of his short, tumultuous administration.

Secretary of Health and Human Services Tom Price speaks before U.S. President Donald Trump called on Republican Senators to move forward and vote on a healthcare bill to replace the Affordable Care Act in the Blue Room of the White House in Washington, U.S., July 24, 2017. REUTERS/Joshua Roberts

Abusing the corporate jet has been a time-honored tradition since Bill Lear first took flight in his purpose-built craft from Wichita, Kansas, a half-century ago. It became a source of shareholder angst within two decades, most memorably in the saga over the leveraged buyout of RJR Nabisco, which private-equity firm KKR won. The tobacco-to-cookies conglomerate’s chief famously shuttled his pet dog Rocco coast-to-coast on one of the company’s 10 planes after it bit a security guard at a golf tournament.

Needless to say, ever since Ross Johnson’s exploitation of shareholder booty was chronicled in “Barbarians at the Gate,” corporate wings have been one of the more tangible symbols of wasteful overhead. Many firms argue they need to maintain a fleet of planes or helicopters at the ready, citing safety concerns, the need to reach far-flung and under-served parts of the world or, less persuasively, to save time for leaders whose high compensation makes every minute count.

Ultimately, though, this is a debate that executives and their boards of directors get to win or lose with their shareholders, as employees of private enterprises. General Electric’s new boss John Flannery, for instance, decided to take the argument off the table by preemptively moving to clip much of the industrial giant’s fleet. For a company that makes jet engines, and does business in 130 countries, that’s a big deal. It is also probably one whose symbolism is greater than its impact on the bottom line – a fact activist investor Nelson Peltz, a big GE owner, surely appreciates.

The point is, it really takes just a minor appreciation of modern business history to recognize the pitfalls of frivolously using the company jet. That is why it is so vexing to see the cabinet of the first self-described businessman president making so many rookie, and inexcusable, mistakes in this regard. The 747 that came with the job may have been one of the allures for the president. But the people who work for him should know better.

None more so than Tom Price, the secretary of health and human services. Set aside the fact that his department, which does stuff like care for sick people, is in penny-pinching mode: it’s planning to slash its budget by some 18 percent next year to $69 billion. Consider that the former Georgia congressman, who eventually became head of the House budget committee, has relentlessly proselytized on the need for government to reduce flab.

In fact, Price was considered such a reliable combatant in the battle to cut spending in Washington that he received a special honor in 2007 from The Council for Citizens Against Government Waste. "Actions speak louder than words," the group's president, Tom Schatz, said in a press release at the time ( Schatz also bestowed upon Price the honorific of "taxpayer hero," and asserted Price "gives taxpayers hope for the future."

Funnily enough, calls to these guardians of taxpayer wealth for a comment on Price’s recent jet-setting have, thus far, gone unrequited.

Politico has aggressively enumerated Price’s jaunts on the taxpayer’s dime. Some are just patently wasteful, like a flight from D.C. to Philadelphia in an Embraer 135LR that cost around $25,000 when a $72 Amtrak ticket might have sufficed. All told, Price appears to have foisted expenses of at least $300,000 on taxpayers for two dozen such trips. Among the more egregious: a flight to St. Simons Island, an exclusive resort in Georgia where – surprise! - he owns a home.

A corporate boss billing shareholders for leisure trips wouldn’t necessarily lead to a sacking. Executives who are outed for aeronautic abuse usually are forced to reimburse the company. Yet even if Price could cough up the dough, his continued employment with the Trump administration would damage what little credibility it still has with conservatives. The president doesn’t need to wait for the inspector general of HHS to weigh in on this matter.

Price has given the president more cause for firing him than, say, Kiss bassist Gene Simmons did on “The Apprentice” years ago. Indeed, in an interview in 2009 on Fox News, just after the financial industry’s woes rocked the world economy, Price went after then-President Barack Obama for lecturing Wall Street on bonuses and the like: “The way to get our house in order is to decrease the amount of spending.” Sacking Price is a small but necessary price to pay for fiscal probity.


Reuters Breakingviews is the world's leading source of agenda-setting financial insight. As the Reuters brand for financial commentary, we dissect the big business and economic stories as they break around the world every day. A global team of about 30 correspondents in New York, London, Hong Kong and other major cities provides expert analysis in real time.

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