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".