CEO of AMR got $6.6 million in 2007

[lpbrian]

Arpey's short term didn't pay out (and neither did any other exec's).


Here me ol morld, how did Brundages performance help the company in 2007?

 

[local 12 proud]

BTB.....Long hot summer (ourpay) coming your way!

 

[flyastrojets]

Good info eolesen. Thanks.

First, it's not a bonus. Profit sharing isn't a bonus, either. A bonus is an arbitrary amount, where both PUP/PSP and profit sharing are based on pre-defined formulas. The $800 paid out earlier this year was a bonus.

And no, it's not based on last year's performance. AIP and Profit Sharing are based on last year's performance.

PSP/PUP is based on three year share performance. AMR has done better on a three year return, and the plan has paid out three years in a row because of the wave they rode in 2003 and 2004. At some point, it will underperform the peer group. And then, the PSP's will pay out less for three consecutive years (or more) as a result.


Go read the proxy statement. 15% of Arpey's compensation is his base pay, 15% is short term incentive (i.e. previous year's performance), and the remaining 70% is long term compensation (3+ years). Arpey's short term didn't pay out (and neither did any other exec's).

 

[eolesen]

Anything not expected or guaranteed is a bonus.

So if AMR earned $2B in profits, but decided to not pay profit sharing, would you object because it's not guaranteed or expected? Hardly.


You just proved my answer. Anything not expected is a bonus, and anything expected is not a bonus.

The terms of the PSP/PUP plan are in the proxy statement and SEC filings. They pretty clearly state if AMR stock outperforms the peer group on a three year shareholder return basis, a payout is due on a predefined ratio. AMR outperformed. Therefore, payment was earned under the terms of the plan.

That's why the union's grievences on the PUP/PSP went nowhere. The plans were legal, and properly executed. That's what pisses off the unionistas -- they know they're contractual, legal, and they can't stop them on any other grounds other than "do the right thing" which only seems to apply when it involves something benefitting management.

[quote post='595598' date='Apr 20 2008, 03:10 AM']EOlsean says our stock is soaring!![/quote]

I didn't say it was soaring -- Wall Street says it outperformed the rest of the industry on a three year basis.

Here's the facts:

	   Open	  Open	  Open	   Close		  1 Year	 2 Year	 3 Year
Symbol  1/3/2005  1/3/2006  1/3/2007   12/31/2007	 Change	 Change	 Change
AAI	 10.82	 16.26	 11.89	   7.16		   60%		44%		66%
ALK	 33.70	 35.83	 40.25	  25.01		   62%		70%		74%
AMR	 11.65	 22.25	 30.65	  14.03		   46%		63%	   120%
CAL	 13.75	 21.27	 41.95	  22.25		   53%	   105%	   162%
DAL									14.89				   
FRNT	11.21	  9.20	  7.37	   5.26		   71%		57%		47%
HA	   6.80	  3.75	  4.75	   5.10		  107%	   136%		75%
JBLU	23.20	 14.72	 14.34	   5.90		   41%		40%		25%
LCC			   37.20	 53.89	  14.71		   27%		40%   
LUV	 16.34	 16.37	 15.46	  12.20		   79%		75%		75%
MEH	  2.94	  5.65	 11.46	  14.80		  129%	   262%	   503%
MESA	 8.03	 10.51	  8.65	   3.09		   36%		29%		38%
NWA						 14.51				   
RJET	13.50	 15.21	 16.72	  19.59		  117%	   129%	   145%
SKYW	20.10	 27.06	 25.72	   6.85		   27%		25%		34%
UAUA						44.80	  35.66		   80%		
XJT	 12.97	  8.15	  8.01	   2.48		   31%		30%		19%

 

[AMFAMAN]

I didn't say it was soaring -- Wall Street says it outperformed the rest of the industry on a three year basis.

Here's the facts:

	   Open	  Open	  Open	   Close		  1 Year	 2 Year	 3 Year
Symbol  1/3/2005  1/3/2006  1/3/2007   12/31/2007	  Change					Change					 Change
AMR	 11.65	 22.25	 30.65	  14.03		   46%		63%	   120%

The math is very fuzzy, from 11.65 to 14.03 over 3 years is closer to 20%, not 120%. Neither is the 1 year of 30.65 down to 14.03 a 46% increase, more like a 55% decrease.

 

[eolesen]

The math is very fuzzy, from 11.65 to 14.03 over 3 years is closer to 20%, not 120%. Neither is the 1 year of 30.65 down to 14.03 a 46% increase, more like a 55% decrease.

It's the same result, just with two different equations and stated two different ways... Retained value uses 100% as the break between positive/negative, and ROI uses 0% as the breakpoint.

Your 20% shareholder return on investment is my 120% retained value, and your 55% decrease in value is my 46% retained value. If the stock did nothing at all, it would have retained 100% of its value.

Bottom line impact is still the same -- the only three stocks which had a higher valuation after the three years were RJET (Chautauqua/Republic), CAL, and MEH (Midwest), and MEH's value is dubious because of the bidding war that went on during the summer between AAI and TPG.

On a one year valuation, the only stocks who got hammered worse than AMR are the likes of LCC, JBLU, MESA, and a few others.

 

[AMFAMAN]

Your 20% shareholder return on investment is my 120% retained value, and your 55% decrease in value is my 46% retained value. If the stock did nothing at all, it would have retained 100% of its value.

Thanks for explaining the math, but now I wish you didn't as that just pissed me off more than ever. <_<

"Retained Value," what will they think of next to justify another bonus? :down:

 

[eolesen]

Retained value isn't AMR's term. It's from the online source I was using to get the stock comparisons over the three year term.

Getting pissed over stock only matters if you're still holding it.

 

[FWAAA]

I've forgotten which airlines make up the "peer group" against which AMR is compared, but I think that of CAL, MEH and RJET, only CAL is a member of the peer group, so AMR's relative 3 year performance was second best. Right or wrong, that earns the execs the second place PSP percentage.

Some of the peer group filed for Ch 11 and thus by definition underperformed during the three years.

IIRC, even if AMR had finished 2007 lower than three years earlier, the PSP would have paid off as long as AMR's decline was smaller than the peer group's decline over that 3 years.

Perhaps it would make a lot more sense to design an exec variable comp program that relied on profits for at least part of the payout metric, but relative performance makes some sense. If AMR stock loses 50% (or even 80%) of its value over the period, but the stock of all comparable competitors lose 95% of their value (or go bankrupt and wipe out the common stock for a 100% decline), the execs are gonna say "we lost you guys a lot less $$$ than our competitors, so we deserve some reward for that effort."

Those who focus solely on exec pay instead of figuring out how to raise their own pay will obviously disagree that the execs in the previous paragraph deserve something.

Edit to add: In 2007, the APFA said that the peer group consisted of: Continental, Southwest, JetBlue, Northwest, Delta and US Airways.

 

[TIME FOR CHANGE]

Those who focus solely on exec pay instead of figuring out how to raise their own pay will obviously disagree that the execs in the previous paragraph deserve something.

We did raise our pay 6 years ago but the company decided to reneg on the contract.

Yet they see no problem with taking more and more.

Just makes me want to do my job to perfection every day.

 

[eolesen]

All fine and good, except that

1) your union agreed to those changes. By participating in the collective bargaining process, you let a majority of people pick who represents you, and by default, you gave Little the right to modify your paycheck without further ratification.

and

2) the execs aren't taking any more than your unions agreed to during the RPA process. Perhaps you and your representatives should have been more focused on this than you/they were over the trust set up for non-qualified retirement plans, which has turned out to be a non-event in comparison.

Hate to say it, but your unions were so focused on saving jobs and pensions that they didn't bother to see the forest thru all the trees....

 

[TIME FOR CHANGE]

It was Ok for us to give back the farm but when its time for the execs to step up then it becomes a song and a dance that they are entitled to the upsurd compensation.

My union agreed I didnt

The unelected powers to be gave the farm away. They should go out with the garbage management that runs this company.

There is no escape from the twu it is terms of employment at AA.
A company union at its finest.

:down:

 

[Hopeful]

All fine and good, except that

1) your union agreed to those changes. By participating in the collective bargaining process, you let a majority of people pick who represents you, and by default, you gave Little the right to modify your paycheck without further ratification.

and

2) the execs aren't taking any more than your unions agreed to during the RPA process. Perhaps you and your representatives should have been more focused on this than you/they were over the trust set up for non-qualified retirement plans, which has turned out to be a non-event in comparison.

Hate to say it, but your unions were so focused on saving jobs and pensions that they didn't bother to see the forest thru all the trees....

Oh, you must be referring to Carty when he pointed the bankruptcy gun at our heads and said "or else" while locking in his and his top posse's SERPS, guarnateeing thier payouts even in the event of a bankruptcy.....

 

[FWAAA]

Oh, you must be referring to Carty when he pointed the bankruptcy gun at our heads and said "or else" while locking in his and his top posse's SERPS, guarnateeing thier payouts even in the event of a bankruptcy.....

Exactly. Everyone was so focused on the big "discovery" that management had deceitfully funded their SERP (essentially placing it on the same footing as everyone else's pensions) that they lost sight of the real issue: Negotiating a large enough "bonus" for the rank and file in case management's plan succeeded. The plan was to avoid bankruptcy, and as much as the whiners hate it, Arpey scored a victory on that one. And of course, what have the rank and file been complaining about? Not enough payoff for labor. As if that's management's fault too.

Labor's obsession over less than $40 million for the execs helped cost the rank and file $8.2 billion with very little to show for it.

Not unlike this past week's obsession with less than $40 million for the execs (this year's PSP payouts). History tends to repeat itself.

The issue shouldn't be how much the greedy management makes. The issue ought to be how to increase your pay. But that would require innovative thinking. Much easier to resort to the old standby: Paycheck envy.

 

[Joe Patroni]

Exactly. Everyone was so focused on the big "discovery" that management had deceitfully funded their SERP (essentially placing it on the same footing as everyone else's pensions) that they lost sight of the real issue: Negotiating a large enough "bonus" for the rank and file in case management's plan succeeded. The plan was to avoid bankruptcy, and as much as the whiners hate it, Arpey scored a victory on that one. And of course, what have the rank and file been complaining about? Not enough payoff for labor. As if that's management's fault too.

Labor's obsession over less than $40 million for the execs helped cost the rank and file $8.2 billion with very little to show for it.

Not unlike this past week's obsession with less than $40 million for the execs (this year's PSP payouts). History tends to repeat itself.

The issue shouldn't be how much the greedy management makes. The issue ought to be how to increase your pay. But that would require innovative thinking. Much easier to resort to the old standby: Paycheck envy.

Paycheck envy is in full force here. What I don't understand is the PUP payout plan was no big secret in 2003 during giveback time. The union (nor anyone else for that matter) didn't complain back then. Why? I believe that no one ever thought the stock price would ever recover to the point that the PUP payments would happen. I personally thought the company was going to go BK in spite of the giveback.