““CEOs go to their vacation homes just after companies report favorable news, and CEOs return to headquarters right before subsequent news is released. More good news is released when CEOs are back at work, and CEOs appear not to leave headquarters at all if a firm has adverse news to disclose. When CEOs are away from the office, stock prices behave quietly with sharply lower volatility. Volatility increases immediately when CEOs return to work.” —David Yermack, a New York University finance professor, whose recently released study shows a correlation between when CEOs take their private jets on vacation and movements in their companies’ stock price ”
Top executives shouldn't be forced to rely on the airlines or Amtrak
Three key figures in the banking industry's attempt to rebound from the financial crisis missed a much-hyped 11 a.m. meeting at the White House on December 15 when their flights were canceled because of fog at Washington National Airport. The irony is that the executives-Goldman Sachs CEO Lloyd Blankfein, Morgan Stanley CEO John Mack and Citigroup chairman Richard Parsons-had chosen to take airline shuttle flights from New York's La Guardia Airport so they would appear "in touch" with everyday Americans. Had they flown on business jets, they could have landed at other Washington-area airports or delayed their departures until the fog lifted and still arrived in plenty of time. As it was, they had to listen in to the meeting via conference call.
In trying to avoid the kind of public relations humiliations that befell Detroit's auto CEOs when they flew to Washington on business jets to ask for taxpayer bailouts, Blankfein, Mack and Parsons lost the chance to meet with President Obama, Treasury Secretary Timothy Geithner and other senior White House officials. Among the big-name CEOs who benefitted from attending the meeting were Bank of America's Ken Lewis, JP Morgan Chase's Jamie Dimon, BNY Mellon's Bob Kelly and Wells Fargo's John Stumpf.
What surprised me most about the episode wasn't that the bank executives booked airline flights to Washington, but rather that the media blasted them for failing to have the forethought to fly in the night before or ride the train.
Is that really the lesson we want to be taking from this? When the world's most powerful financial executives are summoned to Washington to discuss how to steer the country away from the brink of economic collapse, the first thing they should do is book a seat on Amtrak? Really?
The PR folks at the banks, who presumably had some input into the decision to send their companies' top executives to Washington on airline flights instead of business jets, seemed just as perplexed by the media reaction to the story as I was. "I honestly don't know what to tell people when they ask why our chairman didn't fly to Washington the night before," a spokeswoman for Citigroup told me.
I suggested she should point out that Richard Parsons is a valuable and heavily scheduled executive whose decisions can directly affect the financial well being of countless Citi employees, shareholders and customers. Simply put, he couldn't do his job if he had to spend most nights in hotel rooms or depend on public transportation to reach every crucial business meeting or event. The media doesn't understand-or more likely, simply ignores-the fact that oftentimes leaders like Parsons must travel around the country to attend several meetings in a single day.
My conversation with Citi's PR person took place shortly before the attempted Christmas Day bombing of a Northwest Airlines flight over Detroit. It was also a couple of weeks before an unidentified man traipsed through an exit at Newark Airport, necessitating the evacuation of the terminal and rescreening for thousands of passengers.
I wonder whether the press might have cut Parsons, Blankfein and Mack some slack if those incidents had happened before the White House meeting instead of weeks after. I also wonder what the PR departments and bank executives would decide if another White House meeting were scheduled for this week. Given the travel chaos that occurred in late December and early January, it's hard for me to imagine anyone arguing that a multibillion-dollar firm's chief executive should be bound by airline or train schedules when traveling on important company business.
True, those New York-to-Washington shuttle flights depart often enough. And Amtrak's Acela trains are actually quite convenient for traveling among the cities they serve. But for must-attend meetings (and let's face it, how many meetings are these guys going to these days that aren't critically important?), it seems to me that a large bank's key executives should be flying on business jets nearly every time.
What most people don't understand, of course, is that the cost to make one extra trip on a business jet that's already part of a corporate flight department is actually quite low. We're talking peanuts when you compare it with the expense of a top executive missing a crucial meeting or event because he's stuck behind hundreds of other travelers in an airport security line or is sitting in an airline terminal with a ticket to nowhere after his flight is canceled.
There are times when flying the airlines or taking the train makes sense. That December meeting at the White House? It wasn't one of them.