The climate crisis will have a devastating impact on the world's poor, who will be affected first and most severely – and it’s already happening. One of the most infuriating parts of the climate crisis for me is the way the richest in our society disproportionately contribute to the crisis while the poorest suffer.

Notably, aviation emissions have doubled since the 1980s and the use of private jets, likely the most emission-intensive way of flying, is growing. According to the Intergovernmental Panel on Climate Change (IPCC) aviation accounts for approximately 2% of global CO2 emissions produced by human activity. “Our World In Data” notes that it accounts for 3.5% of effective radiative forcing, which they describe as a closer measure of its impact on global warming.

Shareholders have some insight into corporate jet use through the executive compensation disclosure on a company’s proxy statement. If a company allows an executive to use the company’s private jet for personal use, which can include taking relatives along on work “trips” to exotic locations, it is considered compensation and must be disclosed. But these disclosures are not particularly easy to find: in the proxy material’s summary compensation table, look in the column for “all other compensation” and then check the appropriate footnote under the table.

The full cost of the flight is borne by the company and its shareholders, but a calculated incremental cost is considered a part of the executive’s compensation.

Despite this, the numbers are often large. According to data from ESGauge, in 2022, there were five S&P 500 companies in which this element of a single executive’s “other compensation” was listed at over $1 million dollars. There were an additional 11 companies where the figure was between $500,000 and $1 million.

There are several ways a company could address these concerns:

• End this perk – Of the S&P 500 companies, the vast majority reported no costs on this, which means it was either under the minimum reporting threshold, or that it was not offered at all.

• Limit trips entirely – In 2020, amid the pandemic, the use of this perquisite and the use of corporate jets generally reduced dramatically, proving that this perk is not necessary for business.

• Use alternate forms of transportation for shorter trips – Stay-grounded.org reports that private jets are twice as likely to be used for short trips in Europe, which is particularly inefficient and has a big climate footprint. In the U.S., with its minimal public transportation, private jet usage has a much higher emissions footprint than commercial flights, making private jet use unnecessary and wasteful when compared with other flight options.  

• Recommendations from other sources have included not maintaining corporate jets at all, but subscribing to a service that offers a shared jet service as a less costly alternative.

Aside from the environmental damage, excessive private flights for executives may be a red flag for shareholders. As You Sow has shown that companies with overpaid CEOs have negative long-term shareholder return (ssee The 100 Most Overpaid CEOs). David Yermack, Professor of Finance at New York’s University, found that “firms disclosing the private use of corporate jets during the period 1993-2002 experience negative market revaluations.”[i]

Approaching the issue from a purely corporate governance perspective, shareholders have taken issue with this perk and have filed shareholder proposals on the issue. As You Sow plans to file proposals with two companies, while also highlighting the harmful climate impacts.  While the companies may note that the actual cost represents a small percentage of climate outlays, we believe in the face of the climate crisis we all must do all we can, and this is an easy place to start. 

[i] Andrews, Angela B. and Linn, Scott C. and Yi, Han, Corporate Governance and Executive Perquisites: Evidence from the New SEC Disclosure Rules (March 17, 2009). AAA 2009 Financial Accounting and Reporting Section (FARS) Paper, Available at SSRN: https://ssrn.com/abstract=1268087 or http://dx.doi.org/10.2139/ssrn.1268087