Last February, I brought attention to the fact that Cisco's Board of Directors were "teeing up" the payment of millions of dollars to enable an exceptionally extravagant traveling lifestyle for Cisco CEO John Chambers so he could fly at Cisco's expense in his personally owned $50 million dollar private jet (Chambers bought the jet during the time frame, October 2008, when hundreds of billions of taxpayer money was spent to bailout Cisco's biggest customers).
Fiscal 2009 was the worst economy in John Chambers' lifetime, yet he had no guilt about sticking Cisco with $2.3 million in extravagant traveling expense (see page 75). According to my calculations, Chambers on average travels in his private jet 7 times per month, that works out to Cisco paying Chambers $27,380.00 per flight.
Interestingly, the most expensive "first class" flight I could find today from San Jose, California to New York City was only $1,948.00 roundtrip. That means Chambers is sticking Cisco for an extra $25,432.00 per flight.
It's my opinion, that the hypocrisy of John Chambers has now been absolutely and totally exposed in the following February 5, 2009, New York Times story:
Mr. Chambers told the analysts that Cisco had saved a lot of money during these difficult times by cutting back on travel. For all his telepresence talk, Mr. Chambers remains committed to the value of face-to-face meetings, flying around the globe on a private jet. Ah, but there’s a lesson to be learned even with that, during these grim economic times. "I own my own plane, and that is a huge cost," Mr. Chambers said, during an interview. "I just got a new one and paid for it myself. I continue to pay for a lot of expenses on my own. I think you should take your salary down when tough times occur, and that’s my recommendation for the industry."
Exactly how far down did Chambers take his pay during the tough times of Fiscal 2009?
More juicy tidbits from Cisco's recent SEC filing (see page 75):
Certain Transactions with Related Persons
The spouse of Frank A. Calderoni, Cisco’s Executive Vice President, Chief Financial Officer, serves as Chairman of the Board of Selectica, Inc. (“Selectica”), and she was designated an executive officer of that company in June 2009. During fiscal 2009, Cisco purchased approximately $1.3 million in software licenses, annual maintenance and related technical services from Selectica. Also, in connection with a March 2007 sublease between one of Cisco’s subsidiaries and Selectica, Cisco made payments of approximately $1.1 million to Selectica in fiscal 2009 for rent and management fees, and paid approximately $440,000, including approximately $428,000 of principal and $12,000 of interest (at a rate of 2.6%), to retire an outstanding leasehold improvement allowance provided by Selectica. The sublease is scheduled to terminate in December 2009. Mr. Calderoni had no direct involvement in these transactions.
According to Cisco's SEC filing (see page 75), Cisco payments in fiscal 2009 to Selectica represent approximately 17% of Selectica's total 2009 revenue. Also, earlier this month, the NASDAQ Stock Market sent a warning letter to Selectica notifying it that Selectica's securities are subject to delisting from the NASDAQ stock market.
A son of Richard J. Justice, who served as an executive officer of Cisco until April 2009, is employed by Cisco as a regional sales manager based in Arizona. Mr. Justice’s son received total compensation of $309,861 for fiscal 2009, calculated in the same manner as in the Summary Compensation Table. The total compensation includes salary, commissions, stock and option awards, and other compensation.
In July 2005, Cisco loaned $1,750,000 to Robert W. Lloyd, currently Executive Vice President, Worldwide Operations and an executive officer, in connection with his relocation to the United States after several years in Europe at a time when he was not an executive officer of Cisco. The loan had an interest rate of 3.82%. The loan was secured by a deed of trust on real property. Since the beginning of Cisco’s last fiscal year, the original principal amount of the loan was the largest principal amount outstanding and the amount of interest paid was $260,536. The loan, including all accrued interest, was paid in full in connection with Mr. Lloyd’s appointment as an executive officer.
A brother of Robert W. Lloyd is employed as a sales executive by IBM in Canada. The provision of services by IBM in connection with Cisco products, and the resale of the related Cisco products, comprised a substantial proportion of the sales for Mr. Lloyd’s brother in fiscal 2009. The amount of the transactions in which Mr. Lloyd’s brother had an interest for fiscal 2009 was under $10 million. Mr. Lloyd had no direct involvement in these transactions.
What's your take, during the worst economy in John Chambers' lifetime, did he make the same sacrifice as Cisco employees?
Brad Reese cofounded BradReese.Com Cisco Refurbished, which enables affordable Cisco networks globally by assuring customer satisfaction with guaranteed one year warranties on both Cisco Repair as well as Refurbished Cisco.
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