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CEOs who use the corporate jet for personal trips could be headed for turbulence. Businesses will have to publicly report these flights more often if the Securities and Exchange Commission adopts new rules on executive compensation. This additional disclosure could further inflame shareholders already annoyed at the lavish rewards top officers receive. But though the SEC rules will lead to increased reporting of personal flights, the agency probably won’t give companies any new guidance on how to calculate the value of this travel. Under current SEC rules, a corporation doesn’t have to report the perks it gives an exec if they total less than $50,000. As a result, many businesses don’t publicly disclose the cost of personal flights on company planes. But in January the SEC announced a sweeping new executive compensation proposal that, among other things, would lower the reporting threshold to $10,000 and require itemized disclosure of perks. Companies could face potential penalties for incorrectly reporting perks and their costs, says SEC spokesman John Nestor. If the executive comp proposal is formally adopted, businesses will have to report executives’ personal flights on the company plane much more often. According to Hogan & Hartson partner Alan Dye, this is “not a disclosure a company likes to make.” That’s because companies are often reluctant to admit they’re footing the bill for top executives’ leisure travel, Dye says. Personal use of corporate jets has tripled over the past decade, according to a survey of proxy statements conducted last year by David Fuller of McDermott Will & Emery. The rise can be partly attributed to 9/11, Fuller says. More businesses require their top-ranking officials to use the corporate jet for all travel � whether for work or for pleasure � as a security precaution. The SEC first asked businesses to report on the value of corporate perks in 1992, but it was not until 2004 that the commission asked companies to disclose the value of personal flights using what’s known as the incremental cost. It failed to specify, however, which contributing financial factors should be taken into account for these calculations. Nestor says, “We expect the reported costs to be those that are … over and above what are fixed costs” of corporate jet use. Those variables can (but don’t necessarily have to) include catering, flight crew, fuel, and landing fees. But since there’s no standard formula, companies have been left to devise their own. Many have included some contributing expenses while choosing to ignore others, usually in an attempt to avoid triggering the $50,000 reporting threshold. As of now, no one’s been faulted for underreporting flight values because there aren’t any specific SEC guidelines to be violated. While the commission’s new executive compensation rules would lower the threshold for disclosing perks and require itemized reporting, the agency doesn’t directly address flight cost valuation in its proposal. But the rule changes will be up for a 90-day public comment period. Nestor says that “what gets addressed further down the line will depend on what’s brought up in public comment as being unclear.”

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