Compensation blues costing American Air executives
Tuesday December 2, 4:06 pm ET
By Jon Herskovitz
DALLAS, Dec 2 (Reuters) - American Airlines is finding it hard to get some of its top executives to sit down and enjoy the ride past the brink of bankruptcy to a more stable financial future.
American has been hit by the loss of several leaders over the past few months, with a highlight being the decision of Chief Financial Officer Jeff Campbell last month to become CFO of drug distributor McKesson Corp. (NYSE:MCK - News).
The world's largest airline, a unit of AMR Corp. (NYSE:AMR - News), is facing the same sharp revenue drop that hit the industry after the Sept. 11, 2001 attacks and led to wage cuts at several major carriers.
American, which narrowly avoided bankruptcy in April, is still picking up the pieces from a flap over executive pensions and retention bonuses that cost former Chief Executive Don Carty his job earlier this year.
Apart from its CFO, American has also recently lost Jane Allen, a vice president of in-flight services; Anne McNamara, former general counsel; and other senior managers. Campbell had been CFO only since June 2002, when he replaced Thomas Horton, who left for AT&T Corp.
People familiar with the executive pay structure at American have said that compared to other companies, compensation is on the low end and stress is on the high end.
The airline's workers have little sympathy for the top executives' salary plight when thousands of unionized jobs have been cut and and their pay slashed in a restructuring.
American has launched a massive restructuring aimed at cutting operating costs by $4 billion a year.
"The board at AMR is not going to be in the mood to give top executives special bonuses or favors to get them to stay," said Austan Goolsbee, a professor of economics, University of Chicago Graduate School of Business.
Goolsbee, an expert on executive compensation, said a board of directors is under additional pressure and scrutiny to keep executive pay down when times are bad.
Even though AMR reported a slim third-quarter profit, some industry experts believe the airline is not out of the woods and still has a way to go to before it can be competitive with lower-cost rivals.
There is even more pressure at American because of the flap over executive pensions and retention bonuses that were revealed earlier this year just as rank-and-file workers were voting on new labor deals that would cut their pay by about 16 percent to 23 percent, he said.
As a result, those executives who are able to leave for greener pastures, are taking the chance to do so, Goolsbee said, adding that it may be tough for them to land jobs at other cash-strapped carriers.
AMR Chief Executive Gerard Arpey made it a point when he took over in April that he would not accept some of the perks that cost his predecessor Carty his job. Arpey has also said that American has a deep and talented management pool from which to find successors.
"All employees of the company took a salary cut of one form or another," airline spokesman Al Becker said.
"There are just limits to what the company can do to retain extremely talented people. This presents something of a dilemma for us," Becker said
Tuesday December 2, 4:06 pm ET
By Jon Herskovitz
DALLAS, Dec 2 (Reuters) - American Airlines is finding it hard to get some of its top executives to sit down and enjoy the ride past the brink of bankruptcy to a more stable financial future.
American has been hit by the loss of several leaders over the past few months, with a highlight being the decision of Chief Financial Officer Jeff Campbell last month to become CFO of drug distributor McKesson Corp. (NYSE:MCK - News).
The world's largest airline, a unit of AMR Corp. (NYSE:AMR - News), is facing the same sharp revenue drop that hit the industry after the Sept. 11, 2001 attacks and led to wage cuts at several major carriers.
American, which narrowly avoided bankruptcy in April, is still picking up the pieces from a flap over executive pensions and retention bonuses that cost former Chief Executive Don Carty his job earlier this year.
Apart from its CFO, American has also recently lost Jane Allen, a vice president of in-flight services; Anne McNamara, former general counsel; and other senior managers. Campbell had been CFO only since June 2002, when he replaced Thomas Horton, who left for AT&T Corp.
People familiar with the executive pay structure at American have said that compared to other companies, compensation is on the low end and stress is on the high end.
The airline's workers have little sympathy for the top executives' salary plight when thousands of unionized jobs have been cut and and their pay slashed in a restructuring.
American has launched a massive restructuring aimed at cutting operating costs by $4 billion a year.
"The board at AMR is not going to be in the mood to give top executives special bonuses or favors to get them to stay," said Austan Goolsbee, a professor of economics, University of Chicago Graduate School of Business.
Goolsbee, an expert on executive compensation, said a board of directors is under additional pressure and scrutiny to keep executive pay down when times are bad.
Even though AMR reported a slim third-quarter profit, some industry experts believe the airline is not out of the woods and still has a way to go to before it can be competitive with lower-cost rivals.
There is even more pressure at American because of the flap over executive pensions and retention bonuses that were revealed earlier this year just as rank-and-file workers were voting on new labor deals that would cut their pay by about 16 percent to 23 percent, he said.
As a result, those executives who are able to leave for greener pastures, are taking the chance to do so, Goolsbee said, adding that it may be tough for them to land jobs at other cash-strapped carriers.
AMR Chief Executive Gerard Arpey made it a point when he took over in April that he would not accept some of the perks that cost his predecessor Carty his job. Arpey has also said that American has a deep and talented management pool from which to find successors.
"All employees of the company took a salary cut of one form or another," airline spokesman Al Becker said.
"There are just limits to what the company can do to retain extremely talented people. This presents something of a dilemma for us," Becker said