Unions Dispute Pay

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Oct 7, 2002
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Labor unions balk at UAL executive compensation
Tue Mar 27, 2007 2:42 PM ET


CHICAGO, March 27 (Reuters) - News that Glenn Tilton, chief executive of UAL Corp <UAUA.O>, earned $39.7 million in 2006 drew an angry protest from workers at UAL's United Airlines on Tuesday, with unions demanding their "fair share."

Tilton, who led the parent of the No. 2 U.S. airline through a more than three-year bankruptcy, received a compensation package last year that included salary, stock options and other perks, according to a government filing.

A group called UAL Union Coalition balked at incomes of UAL's management in a statement complaining that workers made painful wage and benefits concessions during the bankruptcy that ended in early 2006.

"The dedication, sweat and sacrifice of all United employees have led United Airlines on the road toward sustained profitability," said the group, whose members include unions representing UAL's pilots, flight attendants and mechanics.

"It is not unreasonable to demand our fair share in the financial rewards that management currently enjoys," the group said.

UAL slashed its costs in bankruptcy by $7 billion a year, cut its work force by 25 percent and jettisoned its underfunded pensions. The company has about 57,000 employees worldwide, according to its Web site.

A UAL spokeswoman was not immediately available to comment on the union statement.

Airline labor unions throughout the industry are riled about management pay. Much of that income, however, is pinned to company performance and is therefore at risk.

Shares of UAL have fallen about 10 percent since new stock were issued in February 2006. UAL shares traded at $38.43 on Nasdaq in afternoon trade on Tuesday.
 
Tilton and his gang of thieves proposed taking about 15% of the new UAUA stock when UAL emerged from Ch 11, estimated at about $900 million. Ben Stein's piece about this attempted theft was priceless:

http://www.iht.com/articles/2006/01/29/business/web.0129.php

The court cut that to about 8%, worth about $480 million or so. Tilton's nearly $40 million merely reflects his share of that $480 million.
 
Tilton and his gang of thieves proposed taking about 15% of the new UAUA stock when UAL emerged from Ch 11, estimated at about $900 million. Ben Stein's piece about this attempted theft was priceless:

http://www.iht.com/articles/2006/01/29/business/web.0129.php

The court cut that to about 8%, worth about $480 million or so. Tilton's nearly $40 million merely reflects his share of that $480 million.

Tilton, and Brace should go to "HELL" and burn. I hope all the employees at UAL stick together as we take them out one by one. I am not given this company another dime. The employees gave and gave and now he doesn't even care about us. So why should we care if United Airlines does well in 2007.
The whole management needs a chop chop .
They sit around finger there ass in the office and collect paychecks... You know who you are...
 
This was the typical CYA response from UA:


Good afternoon. United has filed its proxy statement with the Securities and Exchange Commission. As you may know, the proxy statement details a range of issues in advance of our annual shareholder meeting. I want to give you a heads-up about this filing, as it is possible that it will generate some media coverage. I’ve attached and pasted in some facts and QA on executive compensation, which is one of the subjects addressed in the proxy, to provide some context and further information for you. Thanks and take care, Liz


Key Facts

§ Certain numbers in the proxy are estimates, based in large part on how United performs over a 10-year period, and are by no means guaranteed. They do not reflect what executives actually received or what they were eligible for in 2006, which in all cases is less than half of what is reported. For example, executives would only realize the total value shown if they were to exercise their options for approximately $57 per share.

§ The proxy numbers are not new; they have been reported numerous times, and were exactly what were approved by the court and our creditors committee in connection with our emergence from bankruptcy, which had the benefit of all our unions’ participation and oversight.

§ Our executive compensation plan is directly tied to the performance of the company, and most of our executives have more than 90 percent of their pay at risk. If United does not perform well and drive stockholder value, the executives will not receive anything close to the numbers outlined in the proxy.

Additional Information


* This year is unusual because of new accounting and disclosure rules and the implementation of the Management Equity Incentive Plan (MEIP). While other companies award stock on an annual basis, the costs associated with the MEIP awards granted at exit were a one-time event.



* The MEIP is similar to plans developed at other companies emerging from bankruptcy, and the plan and the individual awards for the named officers were approved by the court last year.



* We believe that we have a market-competitive compensation plan that supports the company’s business objectives and strategy, builds stockholder value and appropriately rewards performance.



* Our senior executives are routinely sought after for positions with companies across a range of industries and, as a result, we need to have a competitive compensation plan.



Q&A



1. Please explain how the Management Equity Incentive Program (MEIP) was developed.


The MEIP was developed with compensation consultants and is comparable to those at other large companies emerging from bankruptcy. It was fully disclosed and approved by the court last year.

The MEIP was designed to align executives’ and shareholders’ interests and supports the company’s strategy to build value. Unlike other companies, United awarded no stock options or bonuses to executives for the three years in which we were in bankruptcy.


2. What does it mean that the executives haven’t received everything outlined in the proxy?


Many of the figures in the proxy represent the total possible compensation for which the executives might become eligible. New accounting and disclosure rules require United to report the non-cash accounting charge of stock and option awards expensed during the year. Because the awards vest over a period of time, the executives would only have access to the percentage of the total that has vested provided other conditions have been met.

For example, the stock options were valued assuming a 10-year life (reflecting the period when the options expire), and standard assumptions about the volatility of airline stock prices. Executives would only realize the value shown in the proxy if they were to exercise their options for approximately $57 per share.

The actual amount of compensation available to the executives during 2006 was less than half of what was reported in the summary compensation tables. For example, Glenn Tilton had access to about $9.3 million, not the $23.8 million reported in the proxy. Pete McDonald had access to about $5.0 million, not $13.2 million. Jake Brace had access to about $4.6 million, not $10.4 million. John Tague had access to about $4.3 million, not $10.1 million. Sara Fields had access to about $2.6 million, not $8.5 million.


3. Please explain Mr. Tilton’s exit agreement.


That is a required disclosure of what he would have received had he left the company at 12/31/06. However, he has not left, making those numbers hypothetical. Most of the value is associated with an assumed acceleration of the MEIP award, which, by contrast, continues to vest as Mr. Tilton continues to stay with United. Exit packages are a standard part of today’s executive contracts.


4. Do you believe Mr. Tilton’s compensation is appropriate, given the financial sacrifices made by the vast majority of employees?


We believe Mr. Tilton’s compensation, of which 96% is at risk and directly tied to company performance, is entirely appropriate. The value of stock and options, which vest over a four-year period, are by no means guaranteed. Mr. Tilton’s compensation directly reflects the contributions that all United employees made to ensure the company's success going forward. His current salary is $100,000 below where it was when he joined United in 2002 and significantly below the market median for similarly sized companies across all industries. In addition, in 2003, 2004 and 2005, he received no stock, he was not eligible for a retention program; and he had no other long-term incentive program. By any number of measures, Mr. Tilton’s total pay continues to be below market.


5. Are employees’ salaries competitive with the market?


Overall compensation, benefits, work rules and other factors make United a competitive employer in the airline industry.


6. Why did Mr. Tilton and Mr. McDonald receive 40 percent raises?


Their contracts are market driven. Mr. McDonald received a competitive offer that the company matched. Even with that merit increase, Mr. Tilton’s salary is still $100,000 below where it was when he joined United in 2002 and remains below those paid to other CEOs of comparable companies. Mr. McDonald received an increase that was in line with a competitive offer he received from a non-passenger airline.


7. Doesn’t this make Mr. Tilton the industry’s highest paid CEO?


Our compensation is based on performance. Our senior executives, like Mr. Tilton, who was a CEO in another industry before joining, have skills that are transferable across industries, so the competitive marketplace for their skills is broader and a more appropriate comparison than the airline industry. Regarding the industry, other airlines have not filed their proxy statements, and we do not have compensation information for them.


8. Why have the named officers all received merit raises this year?


The merit raises were awarded for meeting performance and individual goals. Even taking into account these raises, the compensation levels for these officers remain below average of those of officers at similarly sized companies.


9. Have other officers and senior managers received merit increases and bonuses as well?


Merit increases based on performance were awarded in August for salaried and management employees. Virtually all United employees are eligible to participate in the Success Sharing and Profit Sharing programs.


Read item 4 and 5... so Tilton is underpaid, and employees are competitive? WTF? Yeah, that's why new hire MBAs are at 80K at United, and the long-time employees training them are half that. Get a #### clue UA! isht, GT's car and driver are worth more than many FA and CSR salaries, and they along with everyone else that wears a United uniform are the ones that fueled the company's recovery.

I wish I could unload and say all the asinine itsh that I see going on at WHQ... it's truly a case that "the emperor has no clothes".
 
Tilton's rape and pillaging of UA cash/stock off the backs of employees is truly dispicable. But it's just another shining example of the disconnect in corporate America between the high level executives and the front-line employees. People like Tilton don't give a rat's ass about frontline employees. They're so used to all the trappings of power and having the silver spoon in their mouths that they come to expect such windfalls as their birthright. After all, he did come from the oil industry, which is known for squeezing out exhorbitant profits by keeping oil production in check with OPEC quotas, which results in higher gas prices. So does anyone really think Tilton has any problems pocketing such a large amount of money, given how much the employees have sacrificed in the last several years?

Of course, now that he has his nice, shiny, new digs in downtown Chicago, he doesn't have to face nearly as many employees. Hmmmmmmmmmmmmmmmmm, how convenient.
 
From the Denver Post

United labor groups form coalition
Separate worker groups unite around common issues
By Kelly Yamanouchi
Denver Post Staff Writer
Article Last Updated: 03/27/2007 11:28:50 AM MDT


Unions at United Airlines have formed a coalition, saying unionized employees are "outraged" at the millions of dollars going to upper management.

The group said it formed the "Union Coalition at United Airlines" to "demand our fair share in the financial rewards that management currently enjoys."

Union leaders involved in the coalition come from the Association of Flight Attendants, the Air Line Pilots Association, the Aircraft Mechanics Fraternal Association, the Professional Airline Flight Control Association and the International Federation of Professional and Technical Engineers. Those unions represent more than 30,000 employees at United.

The International Association of Machinists, the largest union at United, is not part of the coalition.

"We don't believe being part of that coalition at this time is in the best interest of our members," said machinists union spokesman Joseph Tiberi. "We have different issues - For example, nobody in that coalition has a pension plan and our members already do and we want to make sure that what we have is preserved and we get to go forward from there when we negotiate."

The machinists union reached a labor agreement with United that included a union pension plan.

Leaders of the Air Line Pilots Association recently reached an agreement with United for changes in their labor contract to allow better working conditions for pilots and more staffing flexibility for the company. Pilots union leaders told members they plan to put a new tentative agreement up for a vote starting around March 30.

The union leaders said they are calling on management to improve compensation and incentive awards for all employees, address quality of work-life issues and move up contract bargaining dates.

United Airlines did not have an immediate comment.
 
And AFA did what/got what for their people...?

Oh.

Nothing.

Joined a "coalition"?


Big whoop.
 
And AFA did what/got what for their people...?

Oh.

Nothing.

Joined a "coalition"?
Big whoop.

Really?

What is the IAM's plan?
I still haven't seen 'plan' materials from my IAM buddies.
Linky Please....... :p

B) UT
 
I don't endorse Tilton's pay by any means. The jibberish that he could go elsewhere is amusing at best. He chose to leave big oil for UA knowing airlines don't pay as much.

What really bothers me more quite frankly is the ignorance most line employees show and their lack of blame toward their unions. The crap that happened at AA & DL is the same issue. The union heads and employee group leaders all knew about the executive pension stipulations that got Carty & Mullin thrown out just like they knew about Tilton's stock package here. They wait until it pays out like it should and they say they had no clue and the membership falls for it without fail. If United came to you and gave you this package, would you turn it down? No...why should Tilton...remember, UA recruited him. It's more disgusting than what Home Depot did to their shareholders. At least they could say that mgmt didn't let anybody know how Nardelli was doing financially. The company (UA in this case) is wise to tell the union leadership. Let them fail to disseminate it...or you fail to ask it. As much as people deride Arpey at AA is making, it's pretty paltry given all the reasons UA uses to justify Tilton's pay. I believe Arpey could transfer his skills much as his CFO did to AT&T before coming back to AA.

It would be wise for the company to keep pumping the fact that your union knew and didn't say a thing...as a matter of fact they signed on for it. If their doing you harm, that's your problem not everyone else's. Workers need to do a better job of getting involved early on. When Tilton leaves, find a way to force the company to show what it plans to pay his replacement and how that will work if the stock rises to different levels.
 
Airline employees and their unions are in the same position as the Native Americans were after the Europeans killed all the buffalo and a huge percentage of their kin.

No real recourse. One side wins; the other loses.

Strike, and the unions will only hurt themselves (remember Eastern Airlines?)

Tilton and Company will retire to their estates and recreate without having to deal with ANY company issues. Does anyone really believe Frank Lorenzo and Stephen Wolf have been chastened? Man, we showed rhem, didn't we? The next managers will have to cope with a loss of market presence caused by the strike and will lower fares to attract passengers. And who will subsidize that?

Employees!

Great!

It seems humankind hasn't changed at all over the millenia. Might makes right...again.

There's always the afterlife.

Maybe things will be fairer there.