American bankruptcy trustee questions $20M severance for CEO

[Traderd]

http://www.chicagotribune.com/busin...0m-severance-for-ceo-20130318,0,2869469.story

"The U.S. trustee overseeing American Airlines' bankruptcy has asked the carrier to justify its offer of $19.9 million in severance pay to Chief Executive Tom Horton, part of compensation linked to its merger with US Airways Group."

"Trustee Tracy Hope Davis said in a filing on Friday to the U.S. Bankruptcy Court in New York that American had not explained why that level of severance pay and "sweeping changes" to various employee pay programs were permissible under the bankruptcy code."

 

[PBRstreetgang]

Send the puke home with a 6 month pie of the month subscription, loaded with fecal coliform and very small basket of Imodium.

 

[bizicmo]

First off I'm guessing he has a contract that requires some sorta payout like this, good for him you get what you can get.
Secondly I feel the BOD made the biggest mistake by not making this a $40 to $50 million payout. How are they going to attact the top talent if they are not willing to make the top payouts to their executives? As we all know executives are far more valuable and effective at adding value to the company as a whole. For every dollar they decrease the regular workers payroll and then add to the executive payroll is adding value to the company while its a breakeven to total payroll. By not paying him more the company is actually decreasing the overall value of the company.

 

[PBRstreetgang]

First off I'm guessing he has a contract that requires some sorta payout like this, good for him you get what you can get.
Secondly I feel the BOD made the biggest mistake by not making this a $40 to $50 million payout. How are they going to attact the top talent if they are not willing to make the top payouts to their executives? As we all know executives are far more valuable and effective at adding value to the company as a whole. For every dollar they decrease the regular workers payroll and then add to the executive payroll is adding value to the company while its a breakeven to total payroll. By not paying him more the company is actually decreasing the overall value of the company.

It's BK, all bets are off, I hope they send him home with nothing but a pie of the month parting gift. There I no way he or any of the idiot trust that currently waste office space in the front offices of Americas Airlines deserve, based on performance any thing other than a mild case of Ebola.

 

[waveflyer]

Rewarding failure and over-rewarding position vs accomplishment is stifling this entire country.

 

[jonjuan]

Rewarding failure and over-rewarding position vs accomplishment is stifling this entire country.

Spot on. That perfectly sums up the current WH administration. Thank you, wave.

 

[doh]

This sums up the last 12 administrations at least! The current office holder is a d-bag, but the previous administrations going back to at least Nixon weren't a whole lot better...

 

[johnsonrod]

C'mon, Horton deserves a lot more cash! Destroying value and employee morale is a full-time job. Wasn't Tilton at UAL paid something like $50 million to leave? I know Horton's former boss Arpey made a lot more money trashing the airline............

 

[FoxHunter]

First off I'm guessing he has a contract that requires some sorta payout like this, good for him you get what you can get.
Secondly I feel the BOD made the biggest mistake by not making this a $40 to $50 million payout. How are they going to attact the top talent if they are not willing to make the top payouts to their executives? As we all know executives are far more valuable and effective at adding value to the company as a whole. For every dollar they decrease the regular workers payroll and then add to the executive payroll is adding value to the company while its a breakeven to total payroll. By not paying him more the company is actually decreasing the overall value of the company.

You must be kidding. Over 30 years the average CEO pay has grown 127 times as fast as the average worker. The average airline pilot pay has dropped 30-40% when adjusted for inflation.

A couple of weeks ago it was announced that the CEO of American Express pay would be $28.5 million this year. That works out to $548,076.92 a week. Sounds good but in 2007 he earned $50,126,585 or $963,792.79 a week. In the last week the news media said the CEO of Boeing will be paid $27.5 million this year or $528,846.15 a week. Must be a reward for the great job he did with the introduction of the 787. It is not only the CEOs. Ina Drew the former CIO of JP Morgan Chase earned a reported $14 million or $269,230.77 a week in 2011. She lost her job because her department lost $6 billion with bad trades.

You say they get paid what the are worth. That is pure hogwash. Executive pay is set by the BOD. The average BOD member earns $240,000 according to a news story about Warren Buffet paying Bill Gates $1800 a year to sit on his Board. Most if not all BOD members are CEOs or hold other very senior positions with other companies. Most graduated from Yale or Harvard or other well known universities. Just human nature to take care of their own. I'll scratch your back and you can scratch mine.

Imagine what pilot pay, working conditions, and benefits would be if each airline had a pilot board made up of pilots from other airlines that would set pilot pay and conditions. My guess the pay would at least double.

Why has CEO pay risen to the level it has today? I would say the incentives have changed. If you google the historic income tax rates in the USA you will find the only time rates were lower than today we're the first couple of years after income tax was introduced. Then the mid 20s until 1932. From 1932 until around 1980 the top rates were much higher. In 1960 the top rate was 91%, 1965 70%, 1969 77%, 1971-1981 70%, 1982-1986 50%, 1988-1990 28%.
In the 50s, 60s, and 70s there was little incentive for a huge payday. In 1965 any earning over $200,000 were subject to a tax of 77%. The $200,000 in 1965 is equal to $1,474,000 today.

 

[bizicmo]

You must be kidding. Over 30 years the average CEO pay has grown 127 times as fast as the average worker. The average airline pilot pay has dropped 30-40% when adjusted for inflation.

A couple of weeks ago it was announced that the CEO of American Express pay would be $28.5 million this year. That works out to $548,076.92 a week. Sounds good but in 2007 he earned $50,126,585 or $963,792.79 a week. In the last week the news media said the CEO of Boeing will be paid $27.5 million this year or $528,846.15 a week. Must be a reward for the great job he did with the introduction of the 787. It is not only the CEOs. Ina Drew the former CIO of JP Morgan Chase earned a reported $14 million or $269,230.77 a week in 2011. She lost her job because her department lost $6 billion with bad trades.

You say they get paid what the are worth. That is pure hogwash. Executive pay is set by the BOD. The average BOD member earns $240,000 according to a news story about Warren Buffet paying Bill Gates $1800 a year to sit on his Board. Most if not all BOD members are CEOs or hold other very senior positions with other companies. Most graduated from Yale or Harvard or other well known universities. Just human nature to take care of their own. I'll scratch your back and you can scratch mine.

Imagine what pilot pay, working conditions, and benefits would be if each airline had a pilot board made up of pilots from other airlines that would set pilot pay and conditions. My guess the pay would at least double.

Why has CEO pay risen to the level it has today? I would say the incentives have changed. If you google the historic income tax rates in the USA you will find the only time rates were lower than today we're the first couple of years after income tax was introduced. Then the mid 20s until 1932. From 1932 until around 1980 the top rates were much higher. In 1960 the top rate was 91%, 1965 70%, 1969 77%, 1971-1981 70%, 1982-1986 50%, 1988-1990 28%.
In the 50s, 60s, and 70s there was little incentive for a huge payday. In 1965 any earning over $200,000 were subject to a tax of 77%. The $200,000 in 1965 is equal to $1,474,000 today.

But how will they get top talent without top pay. You point out Ina drew, they should have been offering more money for that position and they could have avoided that loss. If your only offering 14 million a year for that position, that is the type of results you get. Remember these often recycled executives are the most important people in the world of business. If we don't offer the executives these large pay packages then they won't have any incentive to work. The companies would fail and soon everyone will be out of work. These are the only people in the world that can run these companies. If we risk negotiating their salaries down they might decide to not work companies will fail thus throwing the world into chaos.