Shareholders of oil and natural gas producer EXCO Resources, Inc. (XCO) may have felt a little up in the air at times since 1997, when Douglas H. Miller took the reins as company CEO and Chairman of the Board. In the past 14 years, Miller bought out shareholders in 2003, took the company public in 2006, and tried (but failed) to take the company private again this past summer. But shareholders aren’t the only ones who may not feel grounded; EXCO’s executives spend a fair amount of time up in the air, too – except they do it literally, and in style.
The proxy filed August 23 disclosed that EXCO has been chartering two jets from DHM Aviation, LLC, a company owned by Miller himself. From January 1, 2010 through July 31, 2011, EXCO racked up $1.2 million in charges for using Miller’s company’s aircraft. The proxy includes the hourly charges that the board approved, so it’s clear that some of EXCO’s executives are keeping those jets hopping; directors agreed to pay $4,100 per hour for the smaller jet (including a $400 per hour surcharge) and $5,600 per hour for the larger jet (including the same surcharge; and – in the interest of accuracy – we should add that this rate has fallen $200 per hour since 2009).
Shareholders may wonder where all those flights are headed, but – alas – they’ll have to pose those inquiries to Miller and other board members directly if they want answers. No information is available for either EXCO or DHM Aviation on the Wall Street Journal’s Jet Tracker.
Nor is there much information on exactly who EXCO’s frequent flyers are. The proxy states that the planes are to be used only for business purposes; however, it goes on to say:
“On limited occasions, executives authorized to use chartered aircraft for business travel may, if space allows, bring family members or guests along on the trip provided they have the prior approval of certain members of our senior management. Since we reimburse for use of the aircraft only for business travel and we pay for the aircraft based on the flight hours regardless of the passenger load, there is no incremental direct operating cost to us for the additional passengers.”
While it may be true that there is no “incremental direct operating cost” for the “Family and Friends Fly Free” policy, there is still a cost to the company and its shareholders. We couldn’t help but notice a contrast on this point between EXCO’s proxy and the one that Oracle Corporation (ORCL) filed just this morning. After stating that the board allows Larry Ellison’s and Mark Hurd’s family members to fly on the company jet, Oracle adds:
“However, a portion of the aircraft leasing costs attributed to any non-business passengers cannot be deducted by Oracle for corporate income tax purposes. In the interests of greater transparency, we have reported the amount of these incremental lost tax deductions [of $148,039] for fiscal 2011 as part of the disclosure accompanying the Summary Compensation Table below.”
Presumably EXCO’s accountants follow the same policy, although its proxy is silent on the issue.
Finally, it will be interesting to see how much EXCO pays Miller’s company to lease its jets in 2011. EXCO bought its own jet in August, 2010, and the filing notes that since that time, EXCO mainly uses its own aircraft and “…charters Mr. Miller’s aircraft less frequently when deemed necessary by our senior management either because the Company’s aircraft is already scheduled for use or is unavailable due to maintenance or other requirements.”
So how much less than $1.2 million will EXCO pay for using Miller’s company’s jets? We’ll let you know when the 2012 proxy is filed.
This post was written by footnoted intern Andy Cheng, a rising junior at the University of Chicago.
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