Booz Allen Chairman’s side gig: airplane CEO

Few people will question the fact that running a company — small, large or somewhere in between — takes lots of hard work. So it always amazes us when we come across the type of disclosure we saw in Booz Allen Hamilton’s recent proxy on Chairman and CEO Ralph Shrader’s side business: running a company that owns a corporate jet. Here’s a snip from the proxy:

During fiscal 2011, we recorded expenses of $589,616 for the hiring and use of an aircraft solely for business purposes by a company of which our Chairman of the Board, President and Chief Executive Officer, Dr. Shrader, is the sole owner. The payments we made to the affiliate of Dr. Shrader for such use were based on the market rate charged to third parties for use of the aircraft. In addition, we recorded expenses of $27,328 in fiscal 2011 for technical consulting services incurred by such affiliate in connection with the operation of the aircraft and paid by the Company.

Granted, this isn’t the first time that the company has disclosed payments to Air Shrader Inc. (we’re making that name up, since we have no idea what the company is actually called, though it might be nice if that tidbit of info were in the proxy). But given the scant details provided on this deal, it certainly raises more questions than the disclosure in the proxy answers.

If you figure that the typical corporate jet costs somewhere between $3,000 and $5,000 an hour to operate (based on the size of the plane, primarily), that works out to somewhere between 110 to 180 hours of usage. Of course, we don’t know what type of plane it is since that’s also not important enough to put in the proxy. We also searched the WSJ’s excellent Jet Tracker database (our new favorite database and certainly worth diving into if you haven’t already) and couldn’t find anything without knowing the proper name for Air Shrader. We’re sure that’s just a minor oversight, of course.

Perhaps if this were an isolated thing, we might be inclined to overlook this. But the company’s proxy is littered with things that screamed out to us, despite the fact that it’s market cap is under $300 million. Then again, a general rule of thumb tends to be that smaller public companies are often where the worst related party abuses take place.

The jet, for example, was at the bottom of a relatively lengthy list of related party transactions involving various stripes of relatives: sons, brothers-in-laws and sisters, all of whom are being paid by Booz Allen Hamilton for their various jobs.

Almost as interesting was the fact that Shrader’s “all other comp” of $1.3 million actually exceeds his base salary. Not by a lot, granted, but it’s still one of the few examples that we’ve found that doesn’t involve a separation payment where this actually happens. And, just to be clear, the $1.3 million doesn’t even include that nearly $600K side-gig of running a company that owns a corporate jet.


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