Williams-Sonoma CEO Leases Own Aircraft To Company


#1

W. Howard Lester, long-time CEO of San Francisco-based Williams-Sonoma, leased a 2007 Global 5000 owned by an LLC of his ownership, back to Williams-Sonoma for the following terms:

May 16, 2008 - May 15, 2011

$375,000/mo for 36/mo term ($13,500,000.00)
Insurance coverage for term of lease
Salaries of crew for term of lease
Maintenance program for term of lease

Now, what gets me is this:

The company owned a 2003 Global Express and sold it at the time of the lease agreement. In their 8-K filing, the company CFO reported a pre-tax profit of 16M.

Per the termination terms of the lease agreement, should Lester remove himself from management of the company, the lease becomes void. Last month, he announced his retirement from his post as CEO but would remain as Chairman until 2012. Given this extended Chairmanship, I believe his is still considered active management.

While there might be cost savings in selling an owned aircraft (they owned the 03’ Global), at the end of the term in the lease, what position is the company now in in finding a replacement aircraft. Also noted, the aircraft was not previously owned by Lester. The aircraft was given a reg in 04/08 and the lease was entered into in 05/08.

Is this a common practice? I know Lester has a close relationship with the company given that he purchased it from the founders back in the 70s, and he used 3rd party advisors to close the deal, but is this really good business?

While they clearly had a financial advantage in owning their 03’ and then selling it for a profit, are they not going to be in a tighter situation with Mr. Lester retires and they have to go out and purchase a new aircraft?

They currently store this Global 5000 with a Challenger in a TINY hangar in OAK.


#2

Translation: they are buying him the aircraft.


#3

I get this. But why sell an aircraft that is perfectly good for the company? Given his years of service to the company, why not pull a Steve Jobs and just give it to him outright? Unless he was the only one utilizing the aircraft and they’re going to just use one CL60 (N888WS) for their operations.

Thanks.


#4

Old:

New:


#5

Just another example of corporate greed, and a good one at that.


#6

Or an example of using the tax laws to their utmost.


#7

:unamused: or maybe W. Howard Lester gets his personal jet paid for by the corporation, and a nice little parting gift for his years of service. Who takes it in the arse? The shareholders.


#8

yup, and that clause should have been in the employment contract for the shareholders to read. If they didn’t like it they could vote in a new board. If it was hidden then they sure should vote in a new board.


#9

Also: a lot of equipment, not just airplanes, are disposed of when the tax advantages are used up. i.e. depreciation. Given the purchase date of the original aircraft I’m guessing they would have sold it anyway. The new lease agreement, although relatively short term, is basically the same one they would have gotten from Wells Fargo or any other leasing company. True the company owner gets an airplane paid for, but the cost to the company is no different than using a “real” leasing company.


#10

Would the real leasing company have a $1 buyout at the close?

Wonder if there current lease has that?


#11

The new lease agreement, although relatively short term, is basically the same one they would have gotten from Wells Fargo or any other leasing company. True the company owner gets an airplane paid for, but the cost to the company is no different than using a “real” leasing company.

That still doesn’t excuse the blatant conflict of interest. I know of one privately held food manufacturer whose owner didn’t like the legs their C550 had so he went out and bought a F2TH for his personal travel. Held in the company name and used for company travel in addition to their personal needs. This is fine to me. Privately held, less investors, less exposure.

What they should have done is had him pick out the aircraft that he wanted, given him unlimited access and reimbursement for the jet, and sold it to him on his departure.


#12

I don’t see a conflict of interest unless the contract was hidden from the shareholders. From the information here I don’t see that, where do you see a conflict?


#13

If the stockholders read form 10-Q filed by Williams Sonoma then they will know about the transaction.
Williams-Sonoma Sells Its Jet, Leases Another


#14

Very common practice…also keeps the plane off the books as an asset.

Yes this is an old thread…but the logic does/still applies.


#15

why would this bother anyone if its legal

no one is forced to buy the stock

how many people are employed by the company?

i doubt the ceo is there because he is incompetent - he can’t force the deal on the company - everyone involved agreed to the deal - ceos work - they are there because they worked - this is costing no one money except those that agreed to pay

it is also a private company (publicly traded stock but still a private company) - not our problem

not like he gave away $500 million (taxpayer money) to his political bundlers for a failed company - or bandwidth that destroys gps to his bundlers - or…or…or…

hating success gets you nothing - unless righteous indignation is the goal