Checking it Out
Veteran
- Apr 3, 2003
- 1,702
- 0
Thanks to the Members of Local 514 and the International this letter and flyer were passed out at the Shareholders meeting Wednesday Morning in Dallas.
Mr. Michael A. Miles, Chairman
AMR Compensation Committee
P.O. Box 619616
Dallas/Ft. Worth International Airport, TX 75261
Dear Mr. Miles:
In your capacity as Chairman of the Compensation Committee of the AMR Board of Directors, I call upon you to adopt a policy of complete transparency on executive compensation and to issue a full report to shareholders and the public. Shareholders and employees need to know if there are any other undisclosed compensation arrangements for corporate executives.
As you are well aware, secret pension and bonus agreements that had been granted to senior executives were not revealed until after the Company’s unionized employees had agreed to $1.6 billion in concessions. The resulting scandal led to Donald J. Carty’s resignation as the company’s CEO last month. AMR needs to take extraordinary action in order to restore investor confidence and employee trust. This action must include adopting a comprehensive transparency policy on executive compensation.
We believe that the Compensation Committee has provided something far less than full disclosure of executive compensation. In the Company’s most recent proxy statement, for example, the Committee does not disclose the amount of the Company’s contribution to its supplemental executive retirement plan (SERP), nor the amount paid to top executives as “retention†bonuses. These contributions amounted to $41 million and up to twice the value of executives’ base salaries respectively. These amounts are substantial and clearly belong in the Compensation Committee’s report.
These executive compensation arrangements were disclosed in attachments to the Company’s 10-K filing to the Securities and Exchange Commission (SEC); however, the actual filing of the report was delayed for two weeks. It now seems clear that the delay was timed for release only after union employee voting had been completed. In any case, it is still unclear why these payments were not detailed in the proxy statement where shareholders first look for information about executive compensation.
The terms of Mr. Carty’s compensation were also the subject of a highly misleading “fact sheet†issued by the Company on April 16 (this “fact sheet†is still posted on the Company’s website). The sheet favorably compares Mr. Carty’s “total cash compensation†to that of CEOs of competing airlines but omits key information including additional raises that had been granted to Mr.Carty. Mr. Carty had just received a
substantial raise in the form of a deferred retention bonus, but the Company characterized the increase as non-cash compensation and did not include it in the equation. Also left out of the Company’s “fact sheet†comparison is any mention of Southwest Airlines, the airline with the largest market capitalization and – not coincidentally it seems – a company that granted a relatively modest package for its CEO.
We believe that this is not the first time that AMR has given less than full information on significant pay increases for senior executives. In the 2000 and 2001 proxies, for example, the Compensation Committee disclosed that it had granted Mr. Carty and other top executives unearned years of service credit in their pension packages. In the Compensation Committee report, these arrangements were inaccurately treated as a simple exchange whereby Mr. Carty and other senior executives received pension enhancements in lieu of discontinued benefits or pay increases.
Specifically, the 2001 proxy states that Mr. Carty received an additional .5 years of service credit for each year “in lieu of a pay increase for the year 2000â€. In fact, Mr. Carty’s salary had increased almost 2% between 1999 and 2002 and his overall compensation rose by 13%.
Mr. Carty and other executives were also granted an additional 1.5 years of service credit per year “to recognize the future loss of the annual cash performance return payment.†We believe this assertion is inaccurate in two aspects. First, one can not equate performance-based compensation and fixed compensation. Second, the expected value of the pension enhancement appears to be significantly higher than that of the forgone performance return payments.
These pension enhancements are not disclosed in the Company’s more recent proxy filings. In fact, most companies that grant unearned years of service to their executives formalize such agreements as exhibits to the company’s annual 10-K filings where shareholders have easier access. Again, AMR did not disclose these arrangements in either the proxy or the exhibits.
We believe that AMR needs to begin disclosing executive compensation in reports or format that is accessible and easily understood by shareholders and employees. Shareholders, including Company employees, need to know about all executive compensation agreements. We need to know what safeguards have been put in place to prevent future executive compensation abuses. We strongly urge that the Company submit all future executive compensation plans, including retirement benefits, to a vote by shareholders. Such compensations plans must be transparent – including dollar values on all forms of executive compensation and an explanation as to how the figures are derived.
Last month’s inexcusable failure to make a timely and full report on the retention bonuses and SERP nearly pulled this carrier into bankruptcy and gravely undermined the employee trust necessary for this carrier to survive. AMR cannot afford any further failures to level with employees and shareholders about executive compensation. We call upon the Compensation Committee to take action immediately to adopt these reforms and work to restore investor and employee trust.
Sincerely,
Sonny Hall, President
SH:cjw opeiu-153 afl-cio
Cc: David L. Boren
Edward A. Brennan
Armando M. Codina
Judith Rodin
Links:
http://twuatd.org/default.asp?id=93&ACT=5&content=315&mnu=93
A flyer was passed out at the door:
http://www.twuatd.org/aarestructure/shareh...r_leaflet_1.pdf
Representatives from the Flight Attendants and Pilots were also present.
TWU SOLIDARITY!
Mr. Michael A. Miles, Chairman
AMR Compensation Committee
P.O. Box 619616
Dallas/Ft. Worth International Airport, TX 75261
Dear Mr. Miles:
In your capacity as Chairman of the Compensation Committee of the AMR Board of Directors, I call upon you to adopt a policy of complete transparency on executive compensation and to issue a full report to shareholders and the public. Shareholders and employees need to know if there are any other undisclosed compensation arrangements for corporate executives.
As you are well aware, secret pension and bonus agreements that had been granted to senior executives were not revealed until after the Company’s unionized employees had agreed to $1.6 billion in concessions. The resulting scandal led to Donald J. Carty’s resignation as the company’s CEO last month. AMR needs to take extraordinary action in order to restore investor confidence and employee trust. This action must include adopting a comprehensive transparency policy on executive compensation.
We believe that the Compensation Committee has provided something far less than full disclosure of executive compensation. In the Company’s most recent proxy statement, for example, the Committee does not disclose the amount of the Company’s contribution to its supplemental executive retirement plan (SERP), nor the amount paid to top executives as “retention†bonuses. These contributions amounted to $41 million and up to twice the value of executives’ base salaries respectively. These amounts are substantial and clearly belong in the Compensation Committee’s report.
These executive compensation arrangements were disclosed in attachments to the Company’s 10-K filing to the Securities and Exchange Commission (SEC); however, the actual filing of the report was delayed for two weeks. It now seems clear that the delay was timed for release only after union employee voting had been completed. In any case, it is still unclear why these payments were not detailed in the proxy statement where shareholders first look for information about executive compensation.
The terms of Mr. Carty’s compensation were also the subject of a highly misleading “fact sheet†issued by the Company on April 16 (this “fact sheet†is still posted on the Company’s website). The sheet favorably compares Mr. Carty’s “total cash compensation†to that of CEOs of competing airlines but omits key information including additional raises that had been granted to Mr.Carty. Mr. Carty had just received a
substantial raise in the form of a deferred retention bonus, but the Company characterized the increase as non-cash compensation and did not include it in the equation. Also left out of the Company’s “fact sheet†comparison is any mention of Southwest Airlines, the airline with the largest market capitalization and – not coincidentally it seems – a company that granted a relatively modest package for its CEO.
We believe that this is not the first time that AMR has given less than full information on significant pay increases for senior executives. In the 2000 and 2001 proxies, for example, the Compensation Committee disclosed that it had granted Mr. Carty and other top executives unearned years of service credit in their pension packages. In the Compensation Committee report, these arrangements were inaccurately treated as a simple exchange whereby Mr. Carty and other senior executives received pension enhancements in lieu of discontinued benefits or pay increases.
Specifically, the 2001 proxy states that Mr. Carty received an additional .5 years of service credit for each year “in lieu of a pay increase for the year 2000â€. In fact, Mr. Carty’s salary had increased almost 2% between 1999 and 2002 and his overall compensation rose by 13%.
Mr. Carty and other executives were also granted an additional 1.5 years of service credit per year “to recognize the future loss of the annual cash performance return payment.†We believe this assertion is inaccurate in two aspects. First, one can not equate performance-based compensation and fixed compensation. Second, the expected value of the pension enhancement appears to be significantly higher than that of the forgone performance return payments.
These pension enhancements are not disclosed in the Company’s more recent proxy filings. In fact, most companies that grant unearned years of service to their executives formalize such agreements as exhibits to the company’s annual 10-K filings where shareholders have easier access. Again, AMR did not disclose these arrangements in either the proxy or the exhibits.
We believe that AMR needs to begin disclosing executive compensation in reports or format that is accessible and easily understood by shareholders and employees. Shareholders, including Company employees, need to know about all executive compensation agreements. We need to know what safeguards have been put in place to prevent future executive compensation abuses. We strongly urge that the Company submit all future executive compensation plans, including retirement benefits, to a vote by shareholders. Such compensations plans must be transparent – including dollar values on all forms of executive compensation and an explanation as to how the figures are derived.
Last month’s inexcusable failure to make a timely and full report on the retention bonuses and SERP nearly pulled this carrier into bankruptcy and gravely undermined the employee trust necessary for this carrier to survive. AMR cannot afford any further failures to level with employees and shareholders about executive compensation. We call upon the Compensation Committee to take action immediately to adopt these reforms and work to restore investor and employee trust.
Sincerely,
Sonny Hall, President
SH:cjw opeiu-153 afl-cio
Cc: David L. Boren
Edward A. Brennan
Armando M. Codina
Judith Rodin
Links:
http://twuatd.org/default.asp?id=93&ACT=5&content=315&mnu=93
A flyer was passed out at the door:
http://www.twuatd.org/aarestructure/shareh...r_leaflet_1.pdf
Representatives from the Flight Attendants and Pilots were also present.
TWU SOLIDARITY!