Israel's biggest company is about to buy its company cars. The IDF is in the middle of a tender meant to obtain about 10,000 fleet vehicles for NCOs and for officers of the rank of major and up. The cars are differentiated by rank; while the actual models have not been chosen, majors will get subcompacts, lieutenant colonels a small sedan, colonels a compact family sedan and brigadier generals a mid-sized car. The phenomenon of company cars is worthy of study both in general, in the context of the army, and with regard to the particular classes of cars chosen by the IDF. My seemingly paradoxical view is that giving officers and NCO's fleet cars is wasteful, yet the cars they are being given are too small. It's like the old joke Woody Allen told: "The food is terrible - and the portions are so small!" Yet there is sometimes wisdom in Woody Allen jokes, and this may be one of those cases. Let's start with Economics 101. This is always a good place to start, though usually a bad place to stay. We learn in introductory economics that any kind of in-kind benefit is inherently welfare-reducing. Each car recipient could be offered the cash value of the leasing together with the option of leasing from the IDF; if any prefer the cash, the program is wasteful since some of the officers could be made better off at lower expense. My guess is that the vast majority of officers would prefer the cash. Either they wouldn't spend that money, if they had it, on a new car right now (likely the majority), or if they did, they would prefer a different car, probably a larger one (almost all of the rest). How many would really choose to spend the money on exactly the kind of car the IDF is providing for them? Of course some of this is offset because of the economies of scale of having a fleet of cars. The IDF gets preferred rates due to their large purchase. But they could still get preferred rates if they leased fewer cars of wider variety to enable officers to choose cars. More importantly, fleet cars have very large "diseconomies." Since the army, not the officer, incurs the depreciation in value, staff cars (like all fleet vehicles) tend to be driven very hard; to the best of my knowledge, the IDF also pays for gas, so they also tend to be driven many more kilometers than a comparable private car. So the question is: Why do they do it? Why does the IDF, as well as many large corporations that provide fleet cars or executive cars, do it? One good reason for an employer to supply an employee with something is that it is in the employer's own interest. Officers have to be present at frequent meetings and events all over the country, and the army wants to make sure they have a reliable means of transportation available. In the good old days, officers had a staff car with a driver, which was certainly far more wasteful of resources. (I wonder when this practice stopped. Do high-ranking IDF officers no longer have their faithful sidekicks? Are there no enlisted men left with the cushy job of driving around a commander? Or is this luxury reserved for officers of higher rank?) Of course, for this it would be enough to require all officers of a certain rank to have a car, but we have narrowed the gap considerably. Another possible, and less generous, motivation is "Meir's law," which states that if you want to do mischief you try to move it off the balance sheet. If you want to give officers a higher salary but don't want the higher salary to appear on the payroll, you can give them a company car. And what about esprit de corps. The army, more than any other employer, wants to inculcate a spirit of uniformity and discipline. If everyone has the same uniform, and if rank is declared by the epaulets, then why not go a step farther and have everyone get a car from the same fleet, and have rank distinguished by the kind of car? Often company cars are referred to as a "perk," or perquisite, meaning they are a status symbol - like a corner office. The army pays people in status as well as in money; that's why armies around the world are so top-heavy with brass. This is a valid argument as far as it goes, but it seems to me there is a hole in it. I gather from the articles on the tender that your average captain is not entitled to a fleet car. So he is going to arrive in his own family car, which is probably a lot nicer than a Daihatsu Sirion (a leading contender for the car for majors). In fact, plenty of average Israelis are driving cars nicer than a Mazda 3, a leading contender for colonels. So the objective of having the luxury of the car arriving at the guard gate commensurate with the rank of the officer inside will be foiled. The base commander will arrive in a Mazda 3, while the captains (who don't get fleet vehicles) will show up in MPVs. If I were the defense minister I would probably look for a cheaper and more flexible way of providing top brass with transportation. But the IDF's rationale for providing company cars is probably better than that of many private companies that provide executive cars, so the decision is not outrageous. However, if they are going to do it, I think they should do it the right way. If someone stuck me with a tiny Sirion, I would demand the right to trade up at my own expense to something a little more roomy, and I think IDF majors deserve this option, too. [email protected] Asher Meir is research director at the Business Ethics Center of Jerusalem (www.besr.org), an independent institute in the Jerusalem College of Technology.