United's Tilton could get stock, options worth $15 million

[Paul]

United Airlines CEO Glenn Tilton could receive stock and options worth $15 million, base pay of more than $600,000 and a bonus that could double his salary when the carrier emerges from Chapter 11 bankruptcy next month, company documents and court papers show.

Tilton would get 545,000 restricted shares and 822,000 options, or just more than 1 percent of the $1.9 billion in equity United intends to issue, if a bankruptcy judge approves.

Overall, United plans to set aside 8 percent of the equity it plans to issue - at a value of around $152 million - for about 400 salaried and management employees.

The proposed incentive plan for senior managers and directors of the nation's No. 2 airline will be a touchy issue as a Chicago bankruptcy court starts hearings Jan. 18. about United's plan for exiting bankruptcy.

Unions representing workers at United, a unit of Elk Grove Village, Ill.-based UAL Corp., blasted the potentially lucrative equity programs Wednesday, noting that United workers have agreed to millions of dollars of pay cuts to help restore the airline to financial health.

Charlotte.com (via AP Wire)


United to pare exec stock plan
Despite cut, unions say $75 million for top 8 is excessive

United Airlines is cutting back the size of a stock-award plan for its executives and directors but still plans to set aside shares with a potential value of $75 million for its top eight executives.

The company's unions, despite the smaller award, plan to contest the carrier's emergence from bankruptcy on the grounds the plan is excessive.

United said in a Wednesday filing with the Securities and Exchange Commission that its board approved a plan to set aside 13.75 million shares for 400 top executives and the company's directors. That's one-quarter fewer than the 18.75 million shares United originally suggested would go into its incentive plan.

Most of the stock would be issued as soon as United exits bankruptcy and would be a combination of restricted stock, which could be sold by the executives only over a four-year period, and stock options, which would provide value only if United stock rises.

Rocky Mountain News

 

[Fly]

This is from a website for United f/a's. Very sad and right on the mark.

For well over five years, I've followed hundreds of United Airlines news stories to provide them on this website. Throughout the years, the stories have ranged from being plain silly (cell phone policy) to the utterly horrific (like 9/11).

Yet, none have been more seemingly unbelievable to me than the MEIP bonuses that were announced Friday on AFA's website.

The centerpiece of the story is a 17-page Management Equity Incentive Plan document. This Management Equity Incentive Plan (MEIP) outlines a "bonus" program for distribution of equity (read: Mo’ Money) upon United’s exit from bankruptcy and in years directly following that exit. According to AFA’s website, this bonus is for 400 unnamed members of United’s management. Full story here >

Of course, the legal document is filled with plenty of attorney-style keyboard masturbation rebuttal text ramblings indicating that these bonuses are “designed consistent with typical market practice...†Yawn. Blah blah blah. My dumb neighbor parks illegally in the handicapped spot; therefore I guess so should I?

Most disturbing item to me was when AFA mentioned that United's POR Disclosure Statement indicates the following:

Quote:
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“awards under the [MEIP]… will not be based on performance conditions.â€
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So these people stand to cash in on millions when United exits bankruptcy? Huh? These bonuses would be awarded regardless of their past or future performance? What? According to a letter by MEC President Greg Davidowitch, “This is purely a reward for not giving up their employment during the bankruptcy - something they had already been handsomely rewarded for through millions of dollars in Key Employee Retention Program (KERP) bonuses.â€
I don’t know...

It ain’t during the good times that one can see the light. No siree. I believe that it is during the difficult and troubled times that you can at long last observe with clarity a person’s true character. There’s a lot about character that certain individuals in United can learn from the military:

Quote:
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LESSON #1: The Marine officer looks out first for his men, making sure that they have food to eat and a place to sleep. When deployed, the Marine officer waits at the end of the mess line until all the PFCs and corporals under his command have been fed.
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It’s simple:




There’s wrong (as in mistakenly sending out a nasty email to all the ORD Flight Attendants). Whoops.

There’s really wrong (as in not apologizing to the employees for that incident). Yeah, whatever.


And then there’s utterly, unquestionably, and undeniably beyond words wrong as in lavishing bonuses upon oneself during the most financially troubled period in United’s history.



Please wake me up. Please tell me I’m misinformed, off base, and totally wrong about these bonuses or that the entire existence of MEIP is utter BS. And please, none of that 'Well they do that kind of thing a lot over at other bankrupt companies' rhetoric.

Considering the sacrifices we’ve all made, the idea of anyone getting bonuses right now is so Goddamn obscene there are no words to describe it.

It just makes me sad. We can do better than this.

 

[ualdriver]

All of the unions knew that this bonus plan (or at least some type of gratuitous bounus plan) was going to be awarded since day 1 of bankruptcy. Glen did too- that's why he left his cushy job to come to our little fiasco. Unfortunately, as employees, we don't control executive compensation, and the most say we'll ever have is during the bankruptcy exit. I am afraid,however, that our objections will fall on deaf ears. They may cut it back a bit to appease everyone (and I think they may have already if I'm not mistaken), but it will still be a windfall for those guys.

The same thing will happen at DAL, NWA, and whoever else enters bankruptcy. It's a good 'ol boys' club in the window offices, and we ain't members.

 

[DCT JVL]

I realize that in the grand scheme of CEO compensation in the United States today, this bonus is a pittance. It is also clear to me that this is a benefit that Tilton is legally entitled to. What astounds me is the arrogance that allows him (and all the others) to completely ignore the overwhelming symbolic importance of this bonus and how it undermines his position at the head of the company.

One of the primary responsibilities of a President/CEO of a company is to lead. A basic tenet of leadership is to set an example for others to follow. What kind of example does it set when you ask your employees to make significant sacrifices, while at the same time taking a bonus that is probably 275x the average annual salary of your line employees?

If you were interested in crushing the morale of your employees and ruining any good faith you may have had in your negotiations with labor, this is probably the way to do it. I just have to wonder how an experienced leader can do something like this without considering the overall implications. The greed is astounding.

The funny thing is, I don't think most line employees would begrudge him a resonable bonus. We all recognize the value of good leadership and see how difficult bankruptcy has been, but the level of this bonus is so insulting and arrogant it defies explanation. It spits in the face of every one of us.

Hyperbole aside, Davidowich was right on when he said this:

"In Medieval times, people guilty of this kind of greed would have been boiled in oil," Greg Davidowitch, president of the Airline Flight Attendants United Master Executive Council, said in a statement. "Our more civilized society has substituted legal remedies where torture was once called for.

"Now, matters like this are left up to the court, not to the mob," he said. "The masses, however, still expect justice--shared pain, shared sacrifice and shared success."

 

[767jetz]

Looks like the shares allocated to the top execs is now down from 15% to 8% of the company. Still a boat load of money for them, but much less of a "land grab" than the initial 15%.

 

[whatkindoffreshhell]

Surely Jake Brace will share in this windfall.

Obscene.

This is one of the indicators why UA's reorg will not result in a successful, independent company.

 

[Fly]

Classic!

Had the HP merger not happened, you'd surely be unemployed by now. But thanks for your thoughts. NOT!!!

 

[767jetz]

Surely Jake Brace will share in this windfall.

Obscene.

This is one of the indicators why UA's reorg will not result in a successful, independent company.

15% was pretty obscene. But 8%??? Give me a break.
How much LCC stock did DP get?

You can bash UA and cry all you want. Doesn't change the fact UA is positioned to excel once again.

 

[whatkindoffreshhell]

HP merger has not affected me one iota. Don't work for 'em!

Question: if your financial advisor led you into personal bankruptcy, would you still be employing that advisor three years later and PAYING HIM A BONUS??

UA will go on. But not as an independent company. Can't. Unsustainable.

Even your beloved Glenn was calling for foreign investment. 24.9% foreign ownership rule is a dinosaur.

I'm not bashing UA nor crying. Simply stating the obvious.

Right now the only assumed position to excel for UA is :mf_boff:
which actually can be quite pleasant depending upon your point of view.

 

[PRINCESS KIDAGAKASH]

You UAL people need to quit whining about these executive bonuses. You,like my coward counterparts here at AA,failed to go to war(strike) when action was called for and we deserve what we are now getting. They're sharing(bonuses) and we are sacrificing! You VOTED YES, so just SHUT UP!

 

[Busdrvr]

Question: if your financial advisor led you into personal bankruptcy, would you still be employing that advisor three years later and PAYING HIM A BONUS??

UA will go on. But not as an independent company. Can't. Unsustainable.

Even your beloved Glenn was calling for foreign investment. 24.9% foreign ownership rule is a dinosaur.

I'm not bashing UA nor crying. Simply stating the obvious.

First, I agree that the level of "ownership" the executive suite is claiming is obscene, and the "reasoning" for it is comical. They claim that it is what other companies do. Ironically, Glen himself made it a point to constantly harp on the fact that we could not do things the way they had always been done. Yet for his pocket, he thinks they should be. As an early STRONG supporter of Glen, I'm astounded by his arrogance. Unfortunately, his contention that high pay is required to attract and keep talented employees, only applie to the "inner circle". If he expects employees to take lower pay as a tradeoff for a stable and prosperous company (job security), then why wouldn't the presidents and Sr VP's also make the same judgement?

Now to you unfounded, unsubstantiated contention that UAL can't prosper, it appears that those "in the know", ie people who have money, and are looking to invest it to make more, have a VERY differant view. UAL estimated that the stock value given to the unsecured creditors will be around 8-12 cents on the dollar. Currently, the unsecured debt is trading significantly above that level, and when ALPA sold the claims of individual pilots who wanted cash instead of stock in the new UAL, they got 24 cents on the dollar at auction. This is 2-3 TIMES the estimated value. UAL will emerge as a VERY strong corporation financially, but unfortunately a crappy place to work...unless of course you're in the "inner circle".

 

[synchronicity]

This is from a website for United f/a's. Very sad and right on the mark.

Please wake me up. Please tell me I’m misinformed, off base, and totally wrong about these bonuses or that the entire existence of MEIP is utter BS. And please, none of that 'Well they do that kind of thing a lot over at other bankrupt companies' rhetoric.

It just makes me sad. We can do better than this.

Unfortunately, that's about the only thing one can say.

My wife's department (which fears that they'll be outsourced to India in the not-too-distant future) was extremely pissed to hear the news, to put it mildly. Granted, they got it slightly wrong (they thought Tilton was getting 15M in cash this year, rather than restricted stock and options that would have an estimated initial value of approximately 15M if they could be exercised immediately, which I'm sure they can not), but still, hearing "management is getting a big chunk o' potential cash after they've gutted your pay, bene's, and work environment" is hardly the way to increase morale throughout an organization.

Leaders lead, and this ain't leadership. You don't make long pronouncements about "shared sacrifice" and all that and then swoop in to grab as much as you can (and hey, it coulda been even worse, MEIP was originally going to be 15% rather 8%, right?), and expect anyone to listen to anything you say.

This is exactly the sort of thing that insures that people will leave and that relations and morale will continually to absolutely stink at UAL. Of course, I guess that's fine with them, as there's plenty of cheap labor outside the US for assorted customer service duties.

But the entire area of executive compensation in the US is screwed up. It's largely a good ol' boys club living high off the hog on Other People's Money, largely insulated from market forces. Maybe if we started outsourcing some senior management jobs; I'm sure there are plenty of highly educated, experienced MBA's in India that could run UAL as good or better than the current crop of executives, maybe for only a couple hundred grand a year and almost no stock incentives. And don't give me the "they don't have experience in the airline industry" line, as Tilton didn't, either.

I'm generally a firm believer in markets to achieve good results, but I was an econ major and am not blind to market failures, unlike many talk radio types and certain conservative politicians.

-synchronicity

 

[UALDC767]

But the entire area of executive compensation in the US is screwed up. It's largely a good ol' boys club living high off the hog on Other People's Money, largely insulated from market forces. Maybe if we started outsourcing some senior management jobs; I'm sure there are plenty of highly educated, experienced MBA's in India that could run UAL as good or better than the current crop of executives, maybe for only a couple hundred grand a year and almost no stock incentives. And don't give me the "they don't have experience in the airline industry" line, as Tilton didn't, either.
-synchronicity

Synch,

I agree with what you write but please...UAL has already tried the above course of action...

Remember Rono Dutta and Rakesh Gangwal?

And how well did that turn out for us? Now if you has suggested MBA's from Swaziland....I would be right with you.

DC

 

[synchronicity]

Synch,

I agree with what you write but please...UAL has already tried the above course of action...

Remember Rono Dutta and Rakesh Gangwal?

And how well did that turn out for us? Now if you has suggested MBA's from Swaziland....I would be right with you.

DC

One of the rumors reported by spouse (and lord knows there are lots floating around, most with absolutely nothing to validate them) is that any outsourcing to India would be to a company owned by Dutta.

"meet the new Boss...same as the old Boss"

-synchronicity

 

[JungleClone]

Is anyone really all that surprised by this? Sweetheart deals like this follow an all too familiar historical pattern in this dysfunctional industry. Everyone should have known that Glenn and his minions would get theirs once UA exits Ch. 11. The galling part of it is that Jake Brace will be richly rewarded. As long as I walk and breath on this earth, I will never understand how such an incompetent, elitist, un-respected windbag could retain employment at United this long, especially considering how he presided over the complete financial destruction of this company when he was the VP of Finance and then CFO.

It might be time to also start shopping for a new CEO before long. My opinion has always been that Tilton was brought in to restructure United, grab his bag of gold, and ride off into the sunset. I don't expect him to be around much longer.