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James Surowiecki on executive perks and how they hurt companies

posted by Jason Kottke   Jun 07, 2004

James Surowiecki on executive perks and how they hurt companies. Surowiecki’s recent book, The Wisdom of Crowds, is interesting reading.

Reader comments

jkottkeJun 07, 2004 at 10:14AM

Here’s a link to David Yermack’s paper on the effect of personal use of corporate jets on a company’s stock price:

“This paper studies perquisites of major company CEOs, focusing on personal use of company planes. For firms that have disclosed this managerial benefit, average shareholder returns under-perform market benchmarks by more than 4 percent annually, a severe gap far exceeding the costs of resources consumed. Around the date of the initial disclosure, firms’ stock prices drop by an average of 2 percent. Regression analysis finds negative associations between CEOs’ personal aircraft use and their compensation and percentage ownership, in accord with Jensen-Meckling (1976) and Fama (1980), but both relations have small magnitude.”

This thread is closed to new comments. Thanks to everyone who responded.