Opinion

Felix Salmon

Executive perk of the day, Vonage edition

By Felix Salmon
November 10, 2009

Michelle Leder finds one of the weirdest executive perks yet in the employment contract for Vonage CEO Mark Lefar:

The Company shall also promptly pay, or reimburse the Executive for, the costs of his private air travel from and to the Company’s principal offices in Holmdel, New Jersey (subject to the submission of reasonable documentation) in (a) an annual amount up to a maximum of $250,000 in 2008 and $600,000 in 2009 and subsequent calendar years while employed during the Term, plus (b) an amount equal to the cost of commercial air travel for each trip (i.e., the cost of a first-class, fully refundable, direct flight booked one week prior to travel) while employed during the Term.

Stripped of the legalese, this seems to mean that Vonage is paying for Lefar to commute by private jet between New Jersey and his home in Atlanta — and then, on top of that, is giving him cash equal to the price that he would have paid for a commercial air ticket, had he flown commercial. As Michelle says:

What kind of sense does that make? Has Lefar figured out a way to be in a Gulfstream and a Delta 737 at the same time?

Maybe Lefar needs his personal assistant to be with him in both Atlanta and Holmdel, but refuses to let the assistant onto the private jet? It’s all extremely peculiar.

Comments
6 comments so far | RSS Comments RSS

Not peculiar at all. One possibility:

He wants to fly his wife up on the jet. That kind of perk is valued the same as the type of first class ticket described in the contract, so its just moving it from Vonage’s left pocket to its right pocket, via the CEO’s bank account. Assuming she actually takes the trip.

Other explanations revolve around the way corporate jet benefits are taxed, but I’ve lost track of how those work.

Posted by Eric | Report as abusive
 

Wow. According the the income statement on Yahoo Finance (link below), Vonage’s combined operating losses for the last three years are more than $600 million. A company in those sorts of dire straights should be flying its CEO on Southwest and Jet Blue, not on private planes.

http://finance.yahoo.com/q/is?s=VG&annua l

 

Obviously he’s bringing someone along with him who is not a Vonage employee.

Posted by Sterling | Report as abusive
 

Is it that difficult to find a CEO in the NJ area who would be able to limit their losses to $600 Million in three years? Are they saying this is the only guy they could find?

Posted by KenG | Report as abusive
 

This does look weird, but another possibility is that it’s just sloppy lawyering.

In particular, the words “costs” and “cost” could be intended to mean costs actually incurred, so costs of private air travel plus actual costs of commercial air travel (on the regrettable occasions when he has to mix with the plebs in first class) would both be covered.

Time to spend less on the private jets, and more on lawyers who can speak English full proper.

Andrew

Posted by Andrew | Report as abusive
 

Pretty ridiculous. This is not Cingular. This is a voip company. There is not much value in that. Brilliany way for a company to give away their service to stay alive and suck the money dry so the investors will never see their money. What’s next? Executive retreat?

Posted by alex | Report as abusive
 

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