Obviously an older article, but only Ben Stein can write a piece like this.
By BEN STEIN
ONE of the best conspiracy movies ever made is the perfect British
classic, "The Third Man." In the most haunting scene, the villain,
played adroitly by Orson Welles, takes Joseph Cotten, the good guy, up
in a Ferris wheel. The villain, named Harry Lime, has been selling
adulterated penicillin in postwar Vienna, making a fortune and causing
children to become paralyzed and die.
Mr. Cotten's character, a pulp fiction writer named Holly Martins,
asks
him how he could do such an evil thing for money. The two men are at
the
top of the Ferris wheel, and the people below them look like tiny
dots.
Mr. Welles's villain looks down and says, "Tell me, would you really
feel any pity if one of those dots stopped moving forever? If I
offered
you £20,000 for every dot that stopped, would you really, old man,
tell
me to keep my money, or would you calculate how many dots you could
afford to spare?"
This scene comes to mind when I think of Glenn F. Tilton and other
executives of the UAL Corporation and the hapless employees of its
primary business, United Airlines. Its history is a perfect text for
the
ethical morass in which American business often finds itself.
United is one of the proudest names in airline history. It has long
been
a synonym for fine service and extensive, convenient routes. In the
early 1990's, when some investment bankers were casting around for a
way
to make tens of millions of dollars, they came up with a doozy: the
employees of UAL would give up some of their salaries and benefits in
exchange for stock in UAL, eventually becoming UAL's largest owner
through an employee stock ownership plan.
The deal went through - with staggering compensation to Wall Street -
and in 1994 the American employees of UAL, as a group, became its
largest owners. Within a few years, overseas personnel were allowed
the
privilege of tossing their life savings into UAL, too.
Trouble was not far behind. The employees found management demanding
pay
cuts, big (and, for passengers, inconvenient) changes and cuts in
scheduling and services, and even silly changes in their once-great
flight attendant uniforms. Then came the blows of 9/11 and a
recession,
and then rising fuel costs. There were demands for more cuts in pay
and
benefits and more layoffs. That was not enough. About three years ago,
UAL was "forced" to enter bankruptcy to stay alive.
This step meant that UAL could drastically cut workers' pay - and it
did. Pensions were simply jettisoned and made the burden of the
federal
government's Pension Benefit Guaranty Corporation, which meant cuts of
close to two-thirds in some pilots' pension payments. And, of course,
the bankruptcy simply eliminated all of that equity in UAL that the
employees had bought with their hard-earned savings.
Thus, in a series of evil events, management of UAL basically ruined
the
lives of the employee-owners, if that is not putting too fine a point
on
it, by taking away their savings, incomes and pensions. (I am indebted
to my pal, Phil DeMuth, for much of this research.)
All right, you might say. What else could management have done amid
high
fuel costs and a deregulated, supercompetitive market?
That's "creative
destruction," and it's good for the economy, some of my fellow
Republicans and admirers of the free market might say. But what about
the rules of law and common decency? Because, you see, there is a bit
more to the story.
Now UAL has been reorganized. It is preparing to emerge from
bankruptcy.
It will soon have a stock offering. This offering is expected to raise
very roughly $6 billion. It is presumably worth that because UAL now
has
such low labor costs that it may actually make a profit of some size.
(I'll believe it when I see it.)
Here comes the good part: management has asked the bankruptcy court to
let it have - free - roughly 15 percent of the stock in the new
company,
or about $900 million. Mr. Tilton, the chief executive, who plays the
Orson Welles character in this drama, would get about $90 million
personally for his hard work shepherding UAL through bankruptcy (for
which he was already paid multiple millions of dollars).
The bankruptcy court, instead of ordering Mr. Tilton's arrest, instead
cut the management share to about 8 percent, so he will get more than
$40 million, more or less. That is more than Lee R. Raymond, the chief
executive of Exxon Mobil, one of the most successful companies of all
time, was paid in 2004 (not counting Mr. Raymond's 28 million shares
of
restricted stock).
So here it is in a nutshell: employees are goaded into investing a big
chunk of their wages and benefits in UAL stock. They lose that. Then
they lose big parts of their pay and pensions. They become peons of
UAL.
Management gets $480 million, more or less. "Creative destruction?" Or
looting?
Wait, Mr. Tilton and Mr. Bankruptcy Judge. The employees were the
owners
of UAL. They were the trustors, and Mr. Tilton and his pals were
trustees for them. How were the trustors wiped out while the trustees,
the fiduciaries, became fantastically rich? Is this the way capitalism
is supposed to work? Trustors save up, and their agents just take
their
savings away from them?
If the company is worth so much that management has hundreds of
millions
coming to them, shouldn't the employee-owners get a taste? Does
capitalism mean anything if the owners of the capital can be wiped out
while their agents grow wealthy? Is this a way to encourage savings
and
the ownership society? Or is this a matter of to him who hath shall be
given?
I know that this is basically the same story I described recently
concerning the Delphi Corporation, where something similar is going
on.
But that's exactly the point. Management is using competition, higher
fuel costs and every other cost complaint to cut the pay and pensions
of
its own employees while enriching itself.
And I can well imagine what goes through Mr. Tilton's mind as he does
it: "Hey, I'm a great executive. Great executives in private-equity
firms make more than I do. Why shouldn't I get the moolah? Basically,
I've worked it so UAL is now a private-equity deal anyway. That's what
it's all about now, isn't it? Who's got the most at the end of the day
at Bighorn or the Reserve or whatever golf course I choose to retire
at?
And, anyway, wouldn't you take $48 million for a few of those dots we
used to call our employees and owners to stop moving?"
Ben Stein is a lawyer, writer, actor and economist.
E-mail: ebiz@...
Moderator note: Less we forget, Tilton was hired by the Board of
Directors to do the job. He was an outsider brought in by them and
is now writing his own check, which they are not disputing. They
deserve the blame; he did their work. They should be despised, but
are escaping responsibility, as they planned.
Denis
--- End forwarded message ---
By BEN STEIN
ONE of the best conspiracy movies ever made is the perfect British
classic, "The Third Man." In the most haunting scene, the villain,
played adroitly by Orson Welles, takes Joseph Cotten, the good guy, up
in a Ferris wheel. The villain, named Harry Lime, has been selling
adulterated penicillin in postwar Vienna, making a fortune and causing
children to become paralyzed and die.
Mr. Cotten's character, a pulp fiction writer named Holly Martins,
asks
him how he could do such an evil thing for money. The two men are at
the
top of the Ferris wheel, and the people below them look like tiny
dots.
Mr. Welles's villain looks down and says, "Tell me, would you really
feel any pity if one of those dots stopped moving forever? If I
offered
you £20,000 for every dot that stopped, would you really, old man,
tell
me to keep my money, or would you calculate how many dots you could
afford to spare?"
This scene comes to mind when I think of Glenn F. Tilton and other
executives of the UAL Corporation and the hapless employees of its
primary business, United Airlines. Its history is a perfect text for
the
ethical morass in which American business often finds itself.
United is one of the proudest names in airline history. It has long
been
a synonym for fine service and extensive, convenient routes. In the
early 1990's, when some investment bankers were casting around for a
way
to make tens of millions of dollars, they came up with a doozy: the
employees of UAL would give up some of their salaries and benefits in
exchange for stock in UAL, eventually becoming UAL's largest owner
through an employee stock ownership plan.
The deal went through - with staggering compensation to Wall Street -
and in 1994 the American employees of UAL, as a group, became its
largest owners. Within a few years, overseas personnel were allowed
the
privilege of tossing their life savings into UAL, too.
Trouble was not far behind. The employees found management demanding
pay
cuts, big (and, for passengers, inconvenient) changes and cuts in
scheduling and services, and even silly changes in their once-great
flight attendant uniforms. Then came the blows of 9/11 and a
recession,
and then rising fuel costs. There were demands for more cuts in pay
and
benefits and more layoffs. That was not enough. About three years ago,
UAL was "forced" to enter bankruptcy to stay alive.
This step meant that UAL could drastically cut workers' pay - and it
did. Pensions were simply jettisoned and made the burden of the
federal
government's Pension Benefit Guaranty Corporation, which meant cuts of
close to two-thirds in some pilots' pension payments. And, of course,
the bankruptcy simply eliminated all of that equity in UAL that the
employees had bought with their hard-earned savings.
Thus, in a series of evil events, management of UAL basically ruined
the
lives of the employee-owners, if that is not putting too fine a point
on
it, by taking away their savings, incomes and pensions. (I am indebted
to my pal, Phil DeMuth, for much of this research.)
All right, you might say. What else could management have done amid
high
fuel costs and a deregulated, supercompetitive market?
That's "creative
destruction," and it's good for the economy, some of my fellow
Republicans and admirers of the free market might say. But what about
the rules of law and common decency? Because, you see, there is a bit
more to the story.
Now UAL has been reorganized. It is preparing to emerge from
bankruptcy.
It will soon have a stock offering. This offering is expected to raise
very roughly $6 billion. It is presumably worth that because UAL now
has
such low labor costs that it may actually make a profit of some size.
(I'll believe it when I see it.)
Here comes the good part: management has asked the bankruptcy court to
let it have - free - roughly 15 percent of the stock in the new
company,
or about $900 million. Mr. Tilton, the chief executive, who plays the
Orson Welles character in this drama, would get about $90 million
personally for his hard work shepherding UAL through bankruptcy (for
which he was already paid multiple millions of dollars).
The bankruptcy court, instead of ordering Mr. Tilton's arrest, instead
cut the management share to about 8 percent, so he will get more than
$40 million, more or less. That is more than Lee R. Raymond, the chief
executive of Exxon Mobil, one of the most successful companies of all
time, was paid in 2004 (not counting Mr. Raymond's 28 million shares
of
restricted stock).
So here it is in a nutshell: employees are goaded into investing a big
chunk of their wages and benefits in UAL stock. They lose that. Then
they lose big parts of their pay and pensions. They become peons of
UAL.
Management gets $480 million, more or less. "Creative destruction?" Or
looting?
Wait, Mr. Tilton and Mr. Bankruptcy Judge. The employees were the
owners
of UAL. They were the trustors, and Mr. Tilton and his pals were
trustees for them. How were the trustors wiped out while the trustees,
the fiduciaries, became fantastically rich? Is this the way capitalism
is supposed to work? Trustors save up, and their agents just take
their
savings away from them?
If the company is worth so much that management has hundreds of
millions
coming to them, shouldn't the employee-owners get a taste? Does
capitalism mean anything if the owners of the capital can be wiped out
while their agents grow wealthy? Is this a way to encourage savings
and
the ownership society? Or is this a matter of to him who hath shall be
given?
I know that this is basically the same story I described recently
concerning the Delphi Corporation, where something similar is going
on.
But that's exactly the point. Management is using competition, higher
fuel costs and every other cost complaint to cut the pay and pensions
of
its own employees while enriching itself.
And I can well imagine what goes through Mr. Tilton's mind as he does
it: "Hey, I'm a great executive. Great executives in private-equity
firms make more than I do. Why shouldn't I get the moolah? Basically,
I've worked it so UAL is now a private-equity deal anyway. That's what
it's all about now, isn't it? Who's got the most at the end of the day
at Bighorn or the Reserve or whatever golf course I choose to retire
at?
And, anyway, wouldn't you take $48 million for a few of those dots we
used to call our employees and owners to stop moving?"
Ben Stein is a lawyer, writer, actor and economist.
E-mail: ebiz@...
Moderator note: Less we forget, Tilton was hired by the Board of
Directors to do the job. He was an outsider brought in by them and
is now writing his own check, which they are not disputing. They
deserve the blame; he did their work. They should be despised, but
are escaping responsibility, as they planned.
Denis
--- End forwarded message ---
