Pesto jumps on the castigate-corporate-excess bandwagon today [that’s BBC business editor Robert Peston, of course], with a post about RBS selling its private jet – one it was embarrassed to be caught owning a few years ago apparently.
But while RBS makes a great target for, well, any criticism really, Peston completely misses the point about corporate jet ownership.
The point about private jets – for shareholders who own banks – is that the expense of using them (let alone the capital outlay in buying them) is usually more than the price of first-class and business-class travel on a mainstream airline.
No – actually the point about private jets is they maximise the time the CEO, or whichever expensive manager du jour is using it, can do their job, as opposed to hanging around at Heathrow – even if it is in the business lounge.
Taking his base salary alone – £1.29m – that’s a daily rate of £4,134.62 – assuming he works a six day week – or £344.55 an hour on a 12-hour day. Factor in the annual bonus of £2.86m last year, and you’re talking £1,100 and change for every hour he’s not spending face time with RBS management or other corporate movers and shakers [OK, it’s a very rough figure, but you get the drift]. And since face time is basically the valuable bit of a CEO’s job, perhaps making them kick their heels in the UK’s congested airports is not the most profitable way to spend shareholders’ money.
You can argue – persuasively – that chief executives and other top managers shouldn’t get paid so much. And you can argue, with the beauty of 20:20 hindsight, that they helped balls up the banking system and thus the economy [though I would make sure I pinned much of the blame on lax government monetary policy too].
You can also argue that even factoring in the savings of CEO time, a private jet is an extravagance that can’t be justified. But to criticise corporate spending without looking at the real costs of the alternatives is sloppy.