Executive Fleet Vehicle Programs: Important or Politically Incorrect?
Executive fleet programs are highly valued by management and many corporations, yet some companies are moving away from executive vehicle fleets. Here are opinions from both sides of the debate.
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In today’s economic environment, push-back is emerging at some companies about company-provided executive vehicle fleets. As the economy worsens and ever-increasing amounts of taxpayer monies are used to prop up financially distressed companies, a negative perception is growing about executive compensation and the different perks tied into these compensation packages.
“We have already seen some companies announce no bonuses as business gets tougher. I suspect you will also see other compensation items, such as cars, put on hold or eliminated,” said Frank Memolo, fleet manager for Panasonic Corp. of North America.
Joe LaRosa, director of global business services for Merck & Co., shares this assessment. “In the U.S., many perks are being reconsidered under pressure from the current financial climate, as well as out of a general sense of accountability.”
Anecdotally, growing evidence indicates this review of perks and compensation is occurring. One example is AstraZeneca, which recently eliminated its executive vehicle program. Likewise, Bristol-Myers Squibb and Textron also discontinued their executive vehicle programs in 2008.
“For top executives in publicly traded companies, the annual proxy statement reports items, such as use of company vehicles, as additional compensation. The appearance to the public and shareholders is not positive for already highly compensated individuals,” said Joe Winarski, director, real estate and corporate services for Textron. “For this reason, I believe cars as part of executive compensation packages will continue to decline.”
Although still representing only a small number of fleets nationwide over the past five years, a growing trend has been for companies to transition executives to car allowances and/or reimbursement programs.
“The current credit crunch affects all of us, execs too,” said Mick Morris, department manager, Fleet Operations for Mercedes-Benz. What was once a “no-brainer” is now scrutinized. Customized vehicle options for execs will become more important than ever before. More questions and support regarding vehicle lease/finance/purchase are inevitable, whether company-owned or employee-owned. Not everyone agrees this is a good move, especially in the long term.
“It will take a while for the upper level of management who make these decisions to realize there are no savings in shifting executive fleets from a company-provided and controlled fleet to another method where a third party is involved, such as Runzheimer. Currently, this is a knee-jerk reaction to unfavorable conditions in the marketplace,” said Phil Schreiber, fleet manager, North America for OTIS Service Center “It will take a few years until the companies that resort to these methods accumulate enough data to realize it was not a cost-effective decision. I predict, at that point, there will be a shift back to a company fleet method.”