investor daily logo

‘Pilot’ CEOs more likely to engage in tax avoidance

4 minute read

A firm's level of tax avoidance is significantly influenced by leaders with “thrill-seeking tendencies”, new research has revealed.

According to a new Deakin University study, firms led by “pilot” CEOs have an effective tax rate of 2.6 per cent — lower than firms managed by non-pilot CEOs.

The study's findings suggest that “thrill-seeking” CEOs are helping companies shave an average of US$4.95 million per annum off their tax bill. 

Inspired by “colourful” CEOs, Deakin researchers set out to investigate an underexplored question in the tax avoidance literature related to the role that individual executive characteristics play in explaining the substantial variation in tax payments between firms.


To test their hypothesis, Deakin researchers crossmatched US data from firms listed in the S&P 1500 with the Federal Aviation Administration licensing database. 

They found that, on average, around 5 to 6 per cent of CEOs held pilot licenses over the study period (1992–2018), making up a large enough group for robust comparison.

“Despite the prevalence of corporate tax avoidance, there are significant differences in firms' tax policies,” Deakin Business School associate professor, Edward Podolski explained.

“Some engage in tax reduction strategies bordering on illegality, while others choose to stay within the letter and the spirit of the law even if it means paying higher taxes.”

Mr Podolski and his peers wanted to understand what explains this difference and whether the personality of CEOs was a significant factor — specifically their thrill-seeking tendencies.

“The nature of modern tax avoidance practices require creativity, willingness to pursue novel and complex strategies, and high tolerance of risk,” he noted.

“Pilot licensing is the only public data we could use to test our hypothesis. We can't know exactly how many corporate leaders enjoy bungee jumping for example, but we believe flying light aircraft is an effective proxy to establish an appetite for risk.”

According to Mr Podolski, the results would likely be mirrored in Australia because of the comparable corporate and cultural environments.

Ultimately, Associate Professor Podolski said his research showed that shareholders, regulators, and board members needed to understand the personality and characteristics of CEOs because they had a material impact on the company's policies and outcomes.

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja's career in journalism spans well over a decade across finance, business and politics. Now an experienced editor and reporter across all elements of the financial services sector, prior to joining Momentum Media, Maja reported for several established news outlets in Southeast Europe, scrutinising key processes in post-conflict societies.