American Airlines
Was anybody surprised at the revelation this week that American Airlines’ executives were securing bonuses and pension perks for themselves while at the same time goading employees into giving up $1.8 billion in future wages and benefits. Sadly, this is just the latest example of corporate double dealing. Last week it was Delta, and next week it will be . . .? Following are excerpts from the press, the pilot’s union, and the airline.
New York Newsday
At issue were bonuses promised to chairman and chief executive Donald J. Carty and five other executives — equal to twice their salary — if they stuck around two more years.
Also, the company partially funded supplemental pensions for 45 top officials last year. Executives would still get those pensions even if American winds up in bankruptcy.
The bonuses and pension upgrades were approved last year, but the company delayed disclosing them until after most employees had finished voting on the givebacks. Union leaders were incensed by the timing of the disclosure, saying employees might have rejected the concessions if they knew of the perks.
New York Times
But the unions said yesterday they had no idea that AMR, the parent company of American, had agreed to give compensation packages to executives even as the company was demanding concessions from the unions. The existence of the trust fund for AMR’s top 45 executives, and “cash retention” bonuses for the company’s top six executives of twice their base salaries, were disclosed Tuesday night in AMR’s annual 10-K filing with the Securities and Exchange Commission. American had delayed the filing for two weeks by saying that it was in the middle of labor negotiations.
Allied Pilot’s Association
“As part of its annual report to shareholders, AMR Corp. is required by the Securities and Exchange Commission to file additional, more detailed supporting documents. These documents reveal that the top six executives will be eligible to receive cash retention bonuses of twice their annual salaries, through a so-called ‘Retention Award Agreement,’ if they stay through January 2005. AMR also established a ‘Supplemental Executive Retirement Program’ for its 45 top executives that protects a portion of their retirement income in the event of a bankruptcy filing.
“An article in today’s edition of The Wall Street Journal reports that management ‘briefed union leaders before the voting’ about these new executive perquisites. That is totally erroneous. We found out about these enhancements to executive compensation only after AMR made its year-end financial filing with the SEC.
“As we seek clarification from management about why we were not previously informed of these items, our pilots are justifiably irate at the latest revelations. For that matter, every employee on this property should rightfully question management’s motives and judgment with regard to enhancing executive compensation. After all, the members of all three unions have just agreed to sacrifice a total of $1.62 billion a year for the next six years.
“From the very beginning of our discussions concerning cost savings, we stressed to management that both the sacrifices and the potential future upside must be shared between the employees and management. In light of the debate we had with management at the very end of negotiations concerning equity and upside sharing, we are particularly disturbed to see that both the sacrifices and upside potential appear utterly lopsided. That is unacceptable.
“On April 10 at a meeting in Dallas/Fort Worth with a large group of American Airlines employees, CEO Don Carty stated that ‘Shared sacrifice has to lead to shared success. . .’” Management would be wise to take this statement to heart and consider the ramifications of their decisions during this critical time.”
American Airlines
“These retention agreements were created more than a year ago, immediately after the events of Sept. 11th, when the industry was struggling and our Board of Directors had serious concerns about our ability to retain our senior management,” said Don Carty, American’s chairman and CEO. “The goal was to give senior officers an incentive to stay with the company when many were being offered more generous packages to go elsewhere.”
Another issue of concern among employees was the company’s Supplemental Executive Retirement Plan or SERP. American said its SERP was established in 1985 and, unlike its other employees’ retirement plans, was never funded. This past October, during a cycle in which the company was contributing to employee pension plans, it made an initial payment — the first ever — to the plan, which remains underfunded
American said the initial payment to the SERP remains in place.
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