screw me once shame on me..........
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eolesen
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- Jul 23, 2003
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Wrench, I don't know that the directors wanted Don out, but there was no indication that he wanted to leave. If that were the case, it would have been used as a bargaining chip during the negotiations.
I will say that he was a dissapointment to many of us in management -before- the April 2003 debacle. Personally, I think he waited far too long to do something, and AMR wound up with a lot more debt than if they'd taken action mid-year 2002. As heartless as it may sound, after 9/11 when it was obvious that AMR was too damn big for its own good, Carty should have halted the TW integration, thrown LLC into bankruptcy, and put it up for sale.
Gee, I guess that's why he spent twenty two years as a real estate mogul, earning ten times what he did as a football player, before being nominated to the board in 2001.
I'm sure you think he was nominated because he was a Cowboy and a Heisman Trophy winner. But, since you're probably as ignorant about the Dallas business community as you are corporate finance, Staubach's reputation as a business owner is fairly solid. The fact that he played football once is secondary.
I agree, but the fact is AA did have a big layoff after 9-11, however they recalled most of the laid off workers in 2002, headcount increased, it didnt make sense at the time having so many people on the payroll and continuing with the TWA deal, in hindsight it was a cash burn and it allowed AA to get what they never would have gotten without running up the debt.
I think you have it backwards, he was made a board member because of his football background and his (less than 1000 employees) corporate history was secondary. The fact is that more people associate Staubach with football than with real estate and there is little doubt that a big part of his business strategy includes capitalizing on his notoriaty as the hometown Quarterback(leader). I liked the guy and thought he was a good quarterback but that doesnt mean that I think that he is anything but a rubber stamp on the AMR board, as you pointed out he has his own business to run, how much of his time do you think is devoted to monitoring whats going on in the airline business?
eolesen
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Bob, as I said, you're entirely ignorant of what he's accomplished as a businessman. His fame helped get him started, but that halo effect died off in the 80's as he proved he really could do something off the field. He's doing commercial real estate, and most companies could give a rats ass about the background of their agent. What they want is a company with a proven track record, and Staubach has just that. They didn't get there just because he used to be a Cowboy.
And, by the way, his "less than 1000 employee" company does in the area of $20-25B of transactions every year. Their revenue per employee far exceeds that of AMR or any airline.
And, by the way, his "less than 1000 employee" company does in the area of $20-25B of transactions every year. Their revenue per employee far exceeds that of AMR or any airline.
777 fixer
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- Jul 21, 2004
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Look at all the professional athletes that once the hopla died down managed to go out and bankrupt themselves. Don't see many companies knocking on their door to sit on the BOD.
eolesen: You may find this rather interesting.
The Baumert Report September 23, 2006
Spotlight on AMR’s Board Pt. II
Prior to AMR’s 2003 debacle with the revelation of a bankruptcy-proof executive pension and retention bonuses, I wrote a report titled "Spotlight on AMR’s Board" which dealt with some potential problems with AMR’s board members.
AMR’s Board of Directors bore a great deal of responsibility for the scandal. After all, they knew and approved of the special pension and bonus plan and as directors they were charged with protecting the interests of shareholders.
Sadly, very little has changed since 2003. The Corporate Library, a research firm in corporate governance and executive compensation, graded AMR an "F" in board composition last year.
Also, three of the five members of 2002's compensation committee (the year the executive pension and bonuses were approved) are still members of the committee: Michael Miles, Judith Rodin and Armando Codina. In fact, Michael Miles is now the chairman of the committee.
Michael Miles was flagged recently by the AFL-CIO as a director prone to granting excessive executive compensation packages. Miles is also on the compensation committees at Dell and Time Warner.
Judith Rodin was rated a "problem director" by The Corporate Library for her work in giving Comcast execs outsized pay packages while chairwoman of the compensation committee.
Philip Purcell is a current member of the compensation committee. He is the former Chairman and CEO of Morgan Stanley who was forced to resign in 2005 after SEC investigations and penalties, poor stock performance and his Machiavellian dealings with senior executives that drew mass resignations. Nevertheless, he was rewarded for his failures and mediocrity as a CEO with an incredibly rich exit package that became a scandal itself.
When Don Carty resigned in disgrace from AMR he was both Chairman of the Board and CEO. In the wake of the scandal, AMR’s board decided to separate the roles of Chairman and CEO for the sake of good corporate governance. It was all for appearances’ sake however.
Just a year later, AMR’s board made CEO Gerard Arpey the Chairman of the Board. As John Chevedden wrote in a recent stockholder proposal, "Separating the roles of CEO and Chairman can promote greater management accountability to shareholders and lead to a more objective evaluation of our CEO."
By allowing Arpey to assume both posts of CEO and Chairman, AMR’s board has once again proved itself to be a weak board, fully deserving of its "F" grade.
Now, as was the case in 2003, many of AMR’s directors have obviously overextended themselves by simultaneously holding board seats at many corporations. Doing so diminishes the amount of time and attention these directors can give to AMR and its shareholders.
Ann Korologos and newest board member Ray Robinson both hold board seats at six corporations.
Edward Brennan and Michael Miles are directors at five different companies. Brennan, AMR’s lead director, was rated a "problem director" by The Corporate Library.
Armando Codina is a board member at four corporations.
There is obviously much to be done to upgrade AMR’s board composition. Yet, it’s clearly doubtful anything will be done given the current make-up of the board and with Arpey as CEO and Chairman. Unfortunately, that may prove once again to be to the detriment of the company and its shareholders.
(Lagniappe: Dell is currently under SEC investigation for accounting and financial reporting matters. Dell’s audit committee is responsible for overseeing accounting and financial reporting. The chairman of Dell’s audit committee is none other than Donald J. Carty.)
Steven Baumert
The author is a registered investment adviser at Baumert Capital Advisors. He does not own either the stock or bonds of AMR/American Airlines. The preceding should not be construed as advice to buy or sell any security and is for informational purposes only.
eolesen
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Not really. Baumert discloses that he doesn't own the stock, but he fails repeatedly to disclose the fact that he's an AA flight attendant.
And, it's even more interesting to note that Roger Staubach, the target of Bob O's flaming, isn't criticised at all in the above article. Surely someone as "objective" as Baumert would have commented on Roger if he were as flawed as the other directors mentioned. Or maybe he's just a Cowboys fan, thus can't see beyond his place in the Ring of Honor...
Lastly, it was made pretty clear that when Ed Brennen was named Chairman, it was temporary in nature, and not an attempt to separate the two positions. I was there in the audience when all this was announced to the media.
And, it's even more interesting to note that Roger Staubach, the target of Bob O's flaming, isn't criticised at all in the above article. Surely someone as "objective" as Baumert would have commented on Roger if he were as flawed as the other directors mentioned. Or maybe he's just a Cowboys fan, thus can't see beyond his place in the Ring of Honor...
Lastly, it was made pretty clear that when Ed Brennen was named Chairman, it was temporary in nature, and not an attempt to separate the two positions. I was there in the audience when all this was announced to the media.
TWAnr
Veteran
who is running for the presidency of the American Airlines flight attendants' union.
Steven Baumert for APFA President
And you are a former member of management who for years presented himself as FormerMODERATOR. Wouldnt Formermanager have been more transparant?
Flaming? Tone down your arrogaqnce for a moment(after all despite your claim of financial expertise you and the team you were a part of failed miserably) and make more of an arguement against the point I was making, that the boards are simply rubber stamps for management.
Bob's use of the plural references that this is quite common in corporations today, along with what has been called the "Imperial CEO". Certainly Carty exemplified that, but AA's most recent stockholder meeting showed that Arpey is not too far from that himself.
However, I wonder just who is the rubber stamp, the board or the CEO. Or are they one entity? Certainly, very little has changed under Arpey. At least not for the better.
Good question.
Having watched this process for well over 15 years, I've never in my existence seen a "managing" group appear to be so hell-bent on self destruction. From my perspective (and no doubt yours and others') these people seem to be doing everything possible to fail. Are these directives coming from the BOD or did the board empower Arpey to operate on his own?
Whiskey, Tango, Foxtrot?
eolesen
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I wanted SelfishB@stard but the bad-word filter wouldn't allow it... And, for the record, my screen name predated me being a manager by a couple of years.
But the difference is that I didn't hide the fact that I worked in management, and never gave financial advice or published a newsletter under a pseudonymn.
I still don't. Whenever I've done quoted or paid work, I've used my real name, and included the appropriate disclaimers/disclosures. Being up-front about any potential biases or conflicts of interest is expected when you're giving paid financial advice. The same should hold true when writing opinion pieces like Baumerts which can easily be mistaken as third-party observations.
You're entitled to your opinion, Bob, but the fact is that you have no idea what decisions get squashed by the board, so how can you say they're rubber stamps?
All in all, there are a few bad decisions that they should have stopped, like the bonuses and the TWA acquisition. That lies at their feet.
But at a macro level, I don't think that either Arpey or the Board have performed that badly. AMR is still solvent and marginally profitable. That doesn't happen by coincidence.
The same holds true for management. For every one bad idea that gets implemented, there were at least ten good ideas also implemented that you know about.
What gets ignored or overlooked is that for every one idea that gets implemented, there are ten or more which are proposed but not implemented because they don't make good business sense, they pose too much risk, or they will alienate customers or employees.
If I weren't under a non-disclosure, I'd love to share some of the better ones I saw along the way, but ideas like selling advertising space on the top and sides of the bag carts, tractors, and lav trucks, or running an employee-only shuttle flight between TUL and DFW on Fridays and Sundays or putting a text-only web browser into green-screen Sabre are all concepts that were given a lot of thought, but died at the vice president level.
ThirdSeatHero
Veteran
I find it rather interesting that some here are trying to detract from Baumerts report by attacking him rather than challenging the veracity of the statements in his report.
Hmmmmm.
Hmmmmm.
While we're in Woulda Coulda Shoulda Land, had Carty and AA come to grips earlier (one year earlier, to be exact) with the reality that September 11 and the rapid expansion plans of WN and B6 (and others) would depress yields for several years, AA would have likely continued its successful fuel hedging program.
The $1.8 billion spent on wages between May 1, 2002 and April 30, 2003 that the concessions finally slashed would have provided ample excess cash to back up the hedging program.
Although you realize it of course, I'll repeat it again for the disgruntled who may not:
Fuel hedging requires large excess cash or good credit, and in early 2003, AA had neither, so was forced to discontinue its hedging program. WN currently has nearly $1.0 billion tied up in its hedging transactions.
What would AA's hedging have provided? Probably close to $2.0 billion a year in fuel cost savings for 2004-2007, or an aggregate of perhaps $8.0 billion by the end of this year. With that money, AA would likely have paid off most of its long-term debt; remember that had the concessions happened one year earlier, the debt would have been about $1.8 billion smaller in the first place.
The admitedly pathetic concession-era profit sharing formula would have paid out handsomely each year. Had the unions extracted the same 35 million non-management options, those would easily be worth double or triple their current $800 million.
And now, five years later, AA would be relatively debt-free, would be paying maybe $2.0 billion less this year for fuel, and would be rolling in profits.
That would have made it child's play for the unions to recover some or most of the paycuts.
Instead, Carty's apparent benevolence to the employees cost the company $6.0 to $10.0 billion (or more) in added fuel expense from 2004 to the present. Had the painful concessions been imposed one year earlier, EXXON (as Owens likes to say) would have been out several billion dollars of employee money. As they say, no good deed goes unpunished, the "good deed" of delaying concession demands until the last possible moment is a prime example.
