Easton Transportation – Initial Approach
During the final years of The Easton Company, one subsidiary that flew under the radar was Easton Transportation, the legal entity that owned and operated the company’s corporate jets. Until the plane crash that took the life of promising Easton executive Simon Miller, the company had used commercial airliners and chartered private planes to transport executives. But after the plane crash, everything changed. Risk managers took a long hard look at the company’s insurance coverage versus Easton’s corporate policy on executive business travel. All related issues went under the microscope.
At the close of this exhaustive study of travel policy and business practices, Jeffrey Elkins was named CEO. Influenced by his closet phobias, Jeffrey reviewed the study recommendations and decided he needed his own plane, flown by a pilot of his choosing who would be on the Easton payroll. Far beyond the study’s findings on what was required for the good of the company, Jeffrey’s decision was driven by a need for control. Thus Easton Transportation was established as a corporate subsidiary – a Learjet secured, a pilot, copilot and mechanic hired, and a hangar leased.
Executive Compensation – The Ripcord on the Golden Parachute
A rocket-surge in executive compensation and platinum parachute packages began near the end of the twentieth century. For those with an insider’s eye, it was clear that the more CEOs asked for, the more they got; and the more they got, the more they wanted. As compensation director for The Easton Company, it was one emerging trend that infuriated T.J. Clarke.
Before joining Easton, Clarke worked as a compensation consultant in the Washington office of a national management consulting firm. The Easton Company was one of his top clients and they seemed to like T.J. as much as he enjoyed working on their account. T.J. was smart, soft spoken, and his appearance brought to mind a rugged young Sundance Kid in a suit and tie. Eventually, The Easton Company made T.J. an offer and hired him away from the consulting firm.
Larry Baxter, Easton’s vice president of human resources, considered it a major coup when he managed to convince Clarke to join the company. Most of Easton’s compensation management responsibilities had been piled on Larry’s plate for years and he was thrilled with the prospect of delegating the analytical portion of compensation work to T.J. It was Larry Baxter’s objective to have Clarke handle all the administrative compensation work while Larry continued as the primary compensation contact to senior management and the Easton board of directors. Once on board, however, it quickly became clear that T.J. Clarke knew a lot more about compensation management than his boss.
Larry Baxter had designed Easton’s original compensation program and over the years held the thing together with sheer willpower. It was a complex hybrid of two very different standard compensation systems, with a heavy dose of Baxter’s personal biases regarding relative job value thrown in. But the program had not kept pace with the times, which was one of the reasons T.J. Clarke was hired.
During his first year at The Easton Company, T.J. Clarke was considered a wonder boy. He advanced the company’s compensation policies and procedures light-years by standardizing the use of market surveys. Then he introduced and implemented a new performance measurement system that was embraced by both supervisors and employees. The new annual review methodologies eliminated the veil of mystery employed by Larry Baxter to hide the shortcomings and subjective nature of the old evaluation process. At year-end, T.J. initiated a project to migrate the company’s entire compensation process from paper and spreadsheet to a sophisticated software application.
Near the end of Clarke’s first year at Easton, pressure was growing from one camp of senior managers to have T.J. assume some executive compensation responsibilities. Larry Baxter was not about to cede the power provided by his direct access to Easton’s executive group, especially regarding executive compensation.
Concerned about his own job security, Larry decided to dampen management’s enthusiasm for the new compensation director by spreading the word among his peers that T.J. wasn’t up to the task. Over lunch or a cup of coffee, Larry began initiating conversations with other division heads on the subject of T.J. Clarke; about how he was a fantastic compensation analyst and great at managing the minutia and data, but when it came to possessing a progressive vision for the company’s compensation program, he couldn’t see the forest for the trees. Larry confided that T.J. was too wrapped up in the details to look up and see the big picture. Not exactly an ideal candidate for directing executive compensation.
At first, this line of conversation with the vice presidents was a tough sell. After all, T.J. Clarke had years of experience as a compensation consultant. How could he not have the vision necessary to handle executive compensation? Plus, T.J. was far more personable and charming than Larry Baxter. But Larry Baxter persisted, even hinting at concerns about confidentiality – a very serious charge in the world of executive pay – and noting by contrast his own years as a trusted advisor to senior management.
In his sole conversation on the topic with the CEO, Larry Baxter gave his pitch a different spin. Larry’s argument to Jeffrey Elkins led Jeffrey to believe that, although T.J. Clarke might actually have some progressive ideas about new trends in compensation practices, it was Larry – not T.J. – who would always be loyal to the interests of the CEO, regardless of the latest developments in compensation programs and practices.
After Baxter left his office that day, Jeffrey Elkins chuckled to himself. Unbeknown to Larry Baxter, Jeffrey Elkins was quite comfortable having his VP of human resources continue as the company’s compensation front man to the board and senior executives. Jeffrey had used Larry’s shortcomings to convince the board to engage an executive compensation firm – professionals who could advise the company on CEO and top executive pay issues. Larry’s mediocrity allowed Jeffrey to continue using the Manhattan-based consultant who masterminded Jeffrey’s recent executive retention agreement. Thomas Williams & Co. was one of the leading executive compensation firms in the country, and Elkins wasn’t about to let some middle manager muddy the waters with grand ideas about company-wide compensation reform.
In Jeffrey’s opinion, executive compensation was a world apart from compensation management for the rank and file. He wanted nothing disrupting the relationship Easton had established with Thomas Williams & Co. They clearly understood compensation design for the CEO class.
Easton Transportation – The Plane, The Plane!
In the beginning the corporate jet was for the exclusive use of Easton’s CEO and any invited executives or guests traveling with him on company business. For a full year only Easton’s board of directors, the risk management director, and a handful of senior employees were aware that the company was no longer chartering planes but had purchased one. Its existence finally surfaced as the focus of an internal audit report including a cost/benefit analysis of corporate jet ownership compared to chartering, leasing, and flying commercial airlines. The report demonstrated that it would be more cost efficient for the company to return to chartering jets for the CEO, given his exclusive use of this transportation and the number of hours the plane and pilot were spending on the ground. As the report was reviewed by a number of company accountants, Easton’s plane was now “out of the hangar.”
Jeffrey Elkins was not happy. He called the audit director to his office to have him personally present the recommendation.
Mark Dixon, the corporate audit director, was a nervous person under the best of circumstances. He found it difficult to sit still during meetings and often wandered around a room picking up and replacing objects as he talked. Dixon knew that if you were lowlier than a vice president, a summons to the CEO’s office was never good news. Mr. Elkins’ secretary did not call to schedule an appointment; instead she told Mark to be in the CEO’s office in ten minutes to discuss the internal audit report on corporate jet usage. The sweating began the moment he hung up the phone. Now sitting face to face with Jeffrey
Elkins in the CEO’s office to explain his recommendation was causing Dixon to perspire heavily from the neck up. He felt like a human fountain.
After listening to Dixon nervously read the recommendation from his audit report, Jeffrey Elkins shot him a mildly disgusted look and then stood up and stretched.
“That’s all well and good,” Elkins began “but what you’re failing to report is how else we might fix this.”
Now Dixon was really getting nervous. What exactly did Elkins have in mind? His brain went to all the wrong places as he tried to come up with some sort of acceptable business response. Dixon’s heart was pounding. He was barely able to control his nervous urge to reach out and touch the stuff on the CEO’s desk.
“Fix this?” he repeated. “How do you mean, sir?” It was taking all his concentration not to pick up the Baccarat crystal paperweight sitting within arm’s reach. Dixon closed his eyes to escape the temptation.
Jeffrey started walking around his office, looking out the expanse of windows facing the lake. Dixon wanted badly to get up from his chair and move around too, but he knew better.
“Well, Mark, you’ve told me that current usage of the assets doesn’t justify ownership. So my question to you is, what’s the alternative? Other than sell the plane, I mean.”
Dixon’s mind was stuck. It was taking all his mental powers to keep his nervous habits in check. He wasn’t following wherever the CEO was going with this. All he could think to say was, “You want me to change the report?” which came out of his mouth as a hoarse squeaky whisper.
Still looking out the window, Jeffrey rolled his eyes and made a mental note to help this guy find the exit door at some appropriate future point in time.
“No, Mark. What I’m saying is, what kind of usage numbers would justify keeping the plane? If we expanded the availability to other senior executives for business travel, where’s the threshold for making this cost effective.”
“Oh.” Mark replied, feeling like an idiot. “I suppose we can take a look at that.” The auditor’s hand darted forward and his fingers briefly brushed one of the cold sharp facets of the paperweight, then quickly recoiled as the CEO began speaking again.
“Do me a favor, Mark. Don’t just look at it. Study it. Then get back to me with the metrics. Then we’ll come up with a new recommendation and draft the appropriate executive travel policies.”
“Anything else?” Mark stammered. As Elkins turned to face him, Mark realized that under the circumstances, this was not a good question to ask the CEO.
“Yeah, Mark. Next time, don’t make me do your job for you.”
The auditor’s face turned bright red as he quickly stood to leave. His hands were shaking and his legs felt like gelatin. Even before he made it to the door, he knew there would be no “next time.” In a corporate environment where there were no second chances, it was the first and last visit Mark Dixon ever made to Jeffrey Elkins’ office.
As a result of the revised audit report, the policy on corporate jet usage was extended to the five most senior executives. Easton was expanding, building new developments and acquiring new properties all around the country. It would be no problem for the cross-country traveling executives to meet the usage requirements outlined in the revised audit.
It was not long, however, before a new problematic issue developed. Jeffrey no longer had control of his plane. Conflicting schedules and flight requests to different locations meant Jeffrey often had to make his execs unhappy, bumping them from using the jet whenever he needed it. He felt like he was sharing a car with kid brothers.
Along with scheduling issues, Jeffrey’s personal health concerns and hygiene phobias were exacerbated by the new arrangements. It was one thing to fly with other people of his choosing and observe what they did. It was quite another to have other people use his plane without him. His imagination about onboard activities was unrestrained.
In Jeffrey’s defense, there were times when his imagination intersected with reality. With more frequent use of the plane by members of the senior executive group – five very different individuals with an assortment of personal lives and personalities – some choice stories began to leak out. A few became material for Easton company lore.
One favorite tale involved an executive who sent the company jet to pick up his son from college at the end of term. Onboard were two members of Easton’s building maintenance staff. The two employees weren’t exactly sure why they were dispatched until they arrived at the kid’s dorm and realized they were there to pack and move all his stuff. When the two employees returned to the airport with a station wagon crammed full of dorm room furnishings, the pilot flipped out. There was no way all that college student junk was going on his plane – not while he was Easton’s pilot. In the end, one employee flew home with the executive’s son and a few of his choice belongings while the other employee drove eleven hours back to Virginia with the remainder of the kid’s possessions.
Eventually, the travel demands of the senior group would justify the purchase of a second jet. But this new corporate jet would be Jeffrey’s alone. The rest of them could share the existing Learjet. He would have his own.
The company jet story that remained dearest to most employees, however, occurred late in the life of The Easton Company. The year before the merger, a long-service mailroom employee reached his forty-fifth anniversary with the company. At age nineteen, the man has started out as Ed Easton’s driver. No other employee had ever achieved the forty-five-year milestone, and at the annual company-wide anniversary function, Jeffrey Elkins personally presented the specially made forty-five-year anniversary pin to Morris Smith.
Beginning at twenty-five years of service, Easton employees celebrating milestone anniversaries were provided a rather significant gift of their own choosing – a leather jacket, a stone garden bench, a bracelet from Tiffany & Co. But on the day of the anniversary presentations, Morris still hadn’t chosen a gift. Basking in the post-presentation ambiance of the amassed corporate employees, Jeffrey was feeling more social than usual. Knowing that Morris had not yet selected a gift, Elkins asked Morris what he might choose to commemorate forty-five years with the company. Morris looked down at his own feet. He rubbed his large rough hands one on top of the other, then reached up and rubbed the back of his neck, rocking nervously from side to side.
“Um, well, um, Mr. Jeffrey,” the big sixty-four-year-old man began, “I haven’t ever been to Vegas…” at which point his voice trailed off and a string of “um”s and “uh”s began again.
“I see,” Elkins responded. But still Morris Smith was looking at his shoes. “Well…”
“Um…and I haven’t ever ridden in the corporate plane neither!” Morris finally finished in one exhaled rush.
“Oh. My…” Jeffrey reacted by taking a short step back as Morris finally raised his sad, smiling eyes to look Jeffrey Elkins directly in the face. Elkins quickly realized two of Smith’s friends from the mailroom were standing close enough to hear this conversation, and they were smiling, trying not to laugh.
“Well, Morris,” Jeffrey recovered, “we’ll have to see what we can do.” And with that Jeffrey Elkins spun around and headed for an exit.
Jeffrey hoped Morris would never have the nerve to follow up on his request, but word got out among employees, and eventually – to save face and be done with the ordeal – he agreed to send Morris and his wife (the man actually had the nerve to assume the gift included his wife) for a weekend in Las Vegas with transportation provided on the company jet. To add legitimacy to the travel, arrangements were made for Morris Smith to tour Easton’s development facilities in Vegas, but it was all so transparent.
“He’s a mailroom clerk, for God’s sake!” Elkins had erupted when he was informed about the tour.
Although the trip to Vegas for the mail clerk took place long before the SEC and the IRS issued tougher rules distinguishing what makes a trip personal and not business, just the idea of it made Jeffrey nervous. He dr
agged his feet on approving Morris Smith’s anniversary trip for several months, but in the end he let it happen. Morris Smith and his wife flew to Las Vegas two weeks before Jeffrey’s new “CEO only” corporate jet was delivered. After Morris returned from Vegas, Elkins never boarded the Learjet again.
Jeffrey’s new corporate jet was a Hawker 800A. Jeffrey had it customized for his height, allowing him to stand erect in the plane without hunching, as the Learjet required. The Hawker had been built to his and his pilot’s specifications and customized with the best avionics. He designed the configuration of the six chairs with optional divan seating and he even selected the interior color pallet. By the time the Hawker was delivered, it boasted a long list of high end installations including: Video Airshow 400, a Grimes Pulselite System, a Safe Flight Windshear Detection System, Devore Tel-Tail lights, an Avalon Acoustics CD sound system, and Jura coffee machine.
The Hawker was Jeffrey’s joy – it made him feel happy in ways he hadn’t experienced in quite a while. With his new plane and his trusted personal pilot, it was once again a pleasure to fly.
Annual Review
One of the duties Jeffrey Elkins delegated to Larry Baxter was to meet with the CEO’s pilot and present his annual performance review. Larry disliked this responsibility for a number of reasons – primarily because the pilot worked exclusively for Jeffrey Elkins. The only time Larry ever saw the pilot was when annual review time rolled around. Each year Jeffrey wrote up a short narrative paragraph of praise and gave it to Larry along with the pilot’s raise and bonus numbers. The CEO expected Larry to convert that information into a formal performance document and then meet with the pilot to deliver the review. Larry felt awkward imparting secondhand information as the pilot grinned and nodded from across the room.
Pink Slips and Parting Gifts Page 6
