Sorry guys but times have changed and there's just no money for pay raises in this industry....
Airline's exec perks accompany push for profit
Karen Ferrick-Roman - Times Staff
Wednesday, December 14, 2005
Management at the new US Airways claims it is ready to move the
airline forward, beyond the serious concessions workers have felt
for several years.
But the forward push hasn't stopped management from paying millions to top executives who stayed with the company, as well as those who have left.
"Thing are very different at the top of an organization," said Randy Nutter, chairman of the Geneva College business department. "The worst that can happen to (US Airways Chief Executive Officer Doug Parker) is he becomes a multimillionaire."
For instance, the twin contracts of Jerry Glass, the architect of
concessions for US Airways' workers, and Elizabeth Lanier, general
counsel, provided both former executive vice presidents with twice
their salaries and target bonuses upon departure, according to a
filing with the Securities and Exchange Commission.
That amounted to $634,950 each for their salaries - plus double
bonuses. And that amount is at least $300,000 less than what the
old US Airways intended to pay.
Their contracts, Glass said, were reduced in bankruptcy court.
Originally, they were to receive 300 percent of their salaries upon
departure, and that would have been computed on an even higher salary.
Lifetime medical benefits disappeared. The stock options they held in
the old US Airways were not carried over into the new company, Glass
said. Like other stockholders, they got nothing.
"This was all litigated in the bankruptcy court, and Judge (Stephen)
Mitchell ruled that they were entitled to these contracts," said US
Airways attorney Janet Dhillon, her responses forwarded in an e-mail
through spokesman Phil Gee.
"Legal, yes; moral, not on the surface," Nutter, the Geneva professor,
wrote in an e-mail.
Glass said he and Lanier stayed with the company from Sept. 27, the
day of the merger, to Sept. 29. Though the SEC filing was from the new
Glass said he and Lanier stayed with the company from Sept. 27, the
day of the merger, to Sept. 29. Though the SEC filing was from the new
US Airways, Glass said the payout didn't depend on them working for
the new company; though still employed by the airline, neither was an
officer in the new company.
Their leaving came as no shock to the new CEO. Parker visited
Pittsburgh on Sept. 15, nearly two weeks before the merger. In that
visit, he said that Glass, 51, the former human resources executive
for US Airways, would not be a boss with the new airline and didn't
want to move to the Tempe, Ariz., headquarters. Instead, Glass would
become a labor consultant and US Airways would be a client. Airline
officials would not say how much Glass would receive.
The SEC filings said contracts for Glass and Lanier provided:
A $317,475 base salary (down from $425,000).
A cash bonus, to be determined by the board, for
making the leap from the old airline to the new one.
An annual bonus, to be determined.
A long-term incentive plan, to be determined.
"Accrued obligations," such as unused vacation time.
18 months of health coverage and life insurance.
Free, lifetime, first-class travel privileges for themselves and their families, with the power to bump paying passengers.
Parker's perks
Doug Parker moved from CEO and president of America West to chairman of the board, CEO and president of the new, much larger US Airways.
He will continue to earn $550,000 a year, as he has for the last two
years, according to an SEC filing.
The salary is the least of his income.
In 2004, he received a $687,500 bonus. At best, Parker could triple
his earnings with his target bonus alone this year, grabbing a
$297,000 to $1.1 million incentive. The board also hands out annual
bonuses, long-term incentives and performance bonuses at will.
Parker "has a lot of reasons to want the airline to do well for two
years, and he'll be even happier if it goes for four," said Nutter,
the Geneva professor.
Dan Cravens, manager of investor relations for US Airways, thought the
buying price for executive stock benefits was around $21 a share,
equivalent to the stock's opening-day price. Some of the stock perks
given to executives could be sold immediately; others must be held for up to four years, or as long as 10 years. This week, the stock was
trading at more than $33 a share.
With restricted stock sales, as well as stock appreciation rights,
executives pocket the difference between the lower buying price and
the higher selling price. Stock appreciation means only money, not
stock, changes hands.
If stock, for instance, were acquired at $21 and sold at $33, Parkerb could gain:
$2.475 million from 206,250 stock options.
$742,500 from 61,875 restricted shares.
$2.35 million from 196,000 stock appreciation rights.
Parker's other perks include a $2 million life insurance policy, being
able to bump first-class customers from seats whenever he and his
family want, not having to pay tax on these first-class seats, and an
allowance for car expenses.
Parker is guaranteed a job - or at the least, a paycheck - until Dec.
31, 2007. If he would bail, he could collect between $1.78 and $2.86 million, plus his stock options.
Lakefield and Crellin
Former US Airways' executives working at the new airline are Bruce
Lakefield, its last CEO, and Al Crellin, its operations executive.
Lakefield walked away with $1.7 million after the merger, according to
SEC documents, although the airline said he did not get bonuses, stock
appreciation rights, stock options or restricted stock.
Lakefield is vice chairman at the new US Airways, retaining the
$425,000-a-year salary he had as CEO. He has waived many perks,
including 401(k) and retirement plans, and will not participate in
incentive plans until US Airways becomes profitable.
But he has received stock. On the day of the merger, Lakefield sold
471,000 shares, a move worth about $1 million.
Crellin is an at-will employee, able to leave or be pushed out at any
time. His base salary was set at $317,475 at the new US Airways, but
the board of directors raised it to $400,000 and dangled up to
$700,000 in performance bonuses.
At the old US Airways, Crellin drew a $346,928 salary in 2004 and
received $219,940 in other perks. Most of that perk payment, $198,886,
covered the tax cost on a company contribution to Crellin's 401(k).
The old airline also provided Crellin with $348,580 in pension
contributions - at a time when workers were facing pay cuts and the
dumping of pension plans.
At the new US Airways, Crellin is eligible for 10,300 restricted stock
shares and 165,000 stock appreciation rights that could amount to more
than $2.1 million at current prices.
If he leaves or is fired, he would receive double both his salary and his annual target bonus.
The gold standard
The New York Times reported in October that the average pay package
for chief executives is at $10 million, up 13 percent from 2003. "In
view of the pension and health insurance givebacks being forced upon
lower-level workers, this surge is especially obscene," wrote Gretchen
Morgenson.
An AFL-CIO Web site said the average nonsupervisory pay nationwide
increased by 2.2 percent from the previous year, to $27,485 in 2004. A
top executive's pay skyrocketed to more than 500 times an average
hourly worker's in 2000, the Web site said, but dropped to about 300
times a worker's wage in 2003.
Some companies have set targets for total executive compensation,
commonly 14 to 20 times the wages of the lowest-paid, full-time
worker, said Nutter, the Geneva professor.
For instance, Ben & Jerry's Ice Cream set a 16-times ratio in 1999,
just before Unilever acquired the company, said spokesman Lee Holden.
But corporate America also goes the other way, with executives earning
50 times what a company's workers earn.
For Nutter, compensation ratio raises a moral issue.
"It's very difficult to believe anybody is worth 50 other people," he said. "The fact that somebody else (at another corporation) did it
doesn't make it the right thing to do."
Airline's exec perks accompany push for profit
Karen Ferrick-Roman - Times Staff
Wednesday, December 14, 2005
Management at the new US Airways claims it is ready to move the
airline forward, beyond the serious concessions workers have felt
for several years.
But the forward push hasn't stopped management from paying millions to top executives who stayed with the company, as well as those who have left.
"Thing are very different at the top of an organization," said Randy Nutter, chairman of the Geneva College business department. "The worst that can happen to (US Airways Chief Executive Officer Doug Parker) is he becomes a multimillionaire."
For instance, the twin contracts of Jerry Glass, the architect of
concessions for US Airways' workers, and Elizabeth Lanier, general
counsel, provided both former executive vice presidents with twice
their salaries and target bonuses upon departure, according to a
filing with the Securities and Exchange Commission.
That amounted to $634,950 each for their salaries - plus double
bonuses. And that amount is at least $300,000 less than what the
old US Airways intended to pay.
Their contracts, Glass said, were reduced in bankruptcy court.
Originally, they were to receive 300 percent of their salaries upon
departure, and that would have been computed on an even higher salary.
Lifetime medical benefits disappeared. The stock options they held in
the old US Airways were not carried over into the new company, Glass
said. Like other stockholders, they got nothing.
"This was all litigated in the bankruptcy court, and Judge (Stephen)
Mitchell ruled that they were entitled to these contracts," said US
Airways attorney Janet Dhillon, her responses forwarded in an e-mail
through spokesman Phil Gee.
"Legal, yes; moral, not on the surface," Nutter, the Geneva professor,
wrote in an e-mail.
Glass said he and Lanier stayed with the company from Sept. 27, the
day of the merger, to Sept. 29. Though the SEC filing was from the new
Glass said he and Lanier stayed with the company from Sept. 27, the
day of the merger, to Sept. 29. Though the SEC filing was from the new
US Airways, Glass said the payout didn't depend on them working for
the new company; though still employed by the airline, neither was an
officer in the new company.
Their leaving came as no shock to the new CEO. Parker visited
Pittsburgh on Sept. 15, nearly two weeks before the merger. In that
visit, he said that Glass, 51, the former human resources executive
for US Airways, would not be a boss with the new airline and didn't
want to move to the Tempe, Ariz., headquarters. Instead, Glass would
become a labor consultant and US Airways would be a client. Airline
officials would not say how much Glass would receive.
The SEC filings said contracts for Glass and Lanier provided:
A $317,475 base salary (down from $425,000).
A cash bonus, to be determined by the board, for
making the leap from the old airline to the new one.
An annual bonus, to be determined.
A long-term incentive plan, to be determined.
"Accrued obligations," such as unused vacation time.
18 months of health coverage and life insurance.
Free, lifetime, first-class travel privileges for themselves and their families, with the power to bump paying passengers.
Parker's perks
Doug Parker moved from CEO and president of America West to chairman of the board, CEO and president of the new, much larger US Airways.
He will continue to earn $550,000 a year, as he has for the last two
years, according to an SEC filing.
The salary is the least of his income.
In 2004, he received a $687,500 bonus. At best, Parker could triple
his earnings with his target bonus alone this year, grabbing a
$297,000 to $1.1 million incentive. The board also hands out annual
bonuses, long-term incentives and performance bonuses at will.
Parker "has a lot of reasons to want the airline to do well for two
years, and he'll be even happier if it goes for four," said Nutter,
the Geneva professor.
Dan Cravens, manager of investor relations for US Airways, thought the
buying price for executive stock benefits was around $21 a share,
equivalent to the stock's opening-day price. Some of the stock perks
given to executives could be sold immediately; others must be held for up to four years, or as long as 10 years. This week, the stock was
trading at more than $33 a share.
With restricted stock sales, as well as stock appreciation rights,
executives pocket the difference between the lower buying price and
the higher selling price. Stock appreciation means only money, not
stock, changes hands.
If stock, for instance, were acquired at $21 and sold at $33, Parkerb could gain:
$2.475 million from 206,250 stock options.
$742,500 from 61,875 restricted shares.
$2.35 million from 196,000 stock appreciation rights.
Parker's other perks include a $2 million life insurance policy, being
able to bump first-class customers from seats whenever he and his
family want, not having to pay tax on these first-class seats, and an
allowance for car expenses.
Parker is guaranteed a job - or at the least, a paycheck - until Dec.
31, 2007. If he would bail, he could collect between $1.78 and $2.86 million, plus his stock options.
Lakefield and Crellin
Former US Airways' executives working at the new airline are Bruce
Lakefield, its last CEO, and Al Crellin, its operations executive.
Lakefield walked away with $1.7 million after the merger, according to
SEC documents, although the airline said he did not get bonuses, stock
appreciation rights, stock options or restricted stock.
Lakefield is vice chairman at the new US Airways, retaining the
$425,000-a-year salary he had as CEO. He has waived many perks,
including 401(k) and retirement plans, and will not participate in
incentive plans until US Airways becomes profitable.
But he has received stock. On the day of the merger, Lakefield sold
471,000 shares, a move worth about $1 million.
Crellin is an at-will employee, able to leave or be pushed out at any
time. His base salary was set at $317,475 at the new US Airways, but
the board of directors raised it to $400,000 and dangled up to
$700,000 in performance bonuses.
At the old US Airways, Crellin drew a $346,928 salary in 2004 and
received $219,940 in other perks. Most of that perk payment, $198,886,
covered the tax cost on a company contribution to Crellin's 401(k).
The old airline also provided Crellin with $348,580 in pension
contributions - at a time when workers were facing pay cuts and the
dumping of pension plans.
At the new US Airways, Crellin is eligible for 10,300 restricted stock
shares and 165,000 stock appreciation rights that could amount to more
than $2.1 million at current prices.
If he leaves or is fired, he would receive double both his salary and his annual target bonus.
The gold standard
The New York Times reported in October that the average pay package
for chief executives is at $10 million, up 13 percent from 2003. "In
view of the pension and health insurance givebacks being forced upon
lower-level workers, this surge is especially obscene," wrote Gretchen
Morgenson.
An AFL-CIO Web site said the average nonsupervisory pay nationwide
increased by 2.2 percent from the previous year, to $27,485 in 2004. A
top executive's pay skyrocketed to more than 500 times an average
hourly worker's in 2000, the Web site said, but dropped to about 300
times a worker's wage in 2003.
Some companies have set targets for total executive compensation,
commonly 14 to 20 times the wages of the lowest-paid, full-time
worker, said Nutter, the Geneva professor.
For instance, Ben & Jerry's Ice Cream set a 16-times ratio in 1999,
just before Unilever acquired the company, said spokesman Lee Holden.
But corporate America also goes the other way, with executives earning
50 times what a company's workers earn.
For Nutter, compensation ratio raises a moral issue.
"It's very difficult to believe anybody is worth 50 other people," he said. "The fact that somebody else (at another corporation) did it
doesn't make it the right thing to do."
