airline golden parachute update
The other day, I mentioned American Airline's announcment of juicy executive retention bonuses immediately after winning concessions from its labor unions; the unions were, of course, outraged.
Jane Galt took note of the same phenomenon:
They asked the unions to make big concessions -- like 15% of salary -- while paying the top 45 executives retention bonuses worth up to twice their base pay, and taking steps to shelter the executive supplemental pension from bankruptcy. And they didn't tell the unions. Too bad for them they had to file with the SEC the same day that voting closed on the concessions deals. The unions, angry that they hadn't been told about the safety net for the executives before being asked to hand back major concessions, scuttled the deal.
Some of it seems to be legit. There were a lot of executives who were eligible for retirement who wanted to take their retirement in a lump sum and get out before the collapse -- the company needed them, and it's unlikely they could have been persuaded to risk their pensions. But the retention bonuses sound like a warm personal gift from the executives to themselves before the bankruptcy court cut their salaries to "junior fryolator operator".
And even if it were totally legit, not telling the unions gave a loaded weapon to anyone agitating against the concessions.
The executives are getting what they deserve, and will hopefully soon be out on the tarmac. The shareholders and employees, unfortunately, aren't. The unions can probably count on the bankruptcy court to cut them a fair deal. But the shareholdes are going to lose everything.
...and in the comment thread, someone linked to this Reuters story saying that American has dropped the retention bonuses (and here's a Fortune article on other excecutive compensation excesses).
(via Oliver Willis)