By Lee Cullum, KERA 90.1 commentator
Dallas, TX – With Enron executives coming finally to justice, it's important to look carefully not only ay the outrages at Enron but also at the thinking in too many corporations that is leading to trouble in American business. It was evident in the problems that Don Carty created at American Airlines before he was forced to resign as president and CEO. This was particularly unfortunate because Don Carty is known as a decent man who tried to generate good feeling among his employees.
What went wrong was the idea that those in management are drastically special people. Of course, they must have a special, protected pension fund expected to survive the throes of bankruptcy. What happens to everybody else seemed not to matter. And certainly the top six or seven people must have retention bonuses - twice their current salary in most cases - to make sure they don't desert the ship in times of trouble.
But where were those executives going to go? To United, currently in bankruptcy? Or U.S. Airways, just out of it? I doubt they are hiring new people. And since those bonuses at American were rescinded, have any of these top managers left? Not that I've heard.
As for pensions, they are, after all, a sacred trust. Surely everybody in the company belongs in the same general plan, with the same protection. If a special pension fund is assembled for management, it must be assembled for all. Benefits may vary. Protection cannot.
The primary flaw in too much corporate thinking is that major executives are entitled to enormous wealth. I'm not convinced of that. Certainly they should be paid generously and awarded stock options, especially if the business is doing well, but big money is the preserve of the creators of companies more than the managers of them.
Robert Townsend, who once ran Avis, said that a salary schedule should be so fair it could be posted for all to see. Some compensation is made public, in annual reports and filings for the Securities and Exchange Commission. It was in papers for the SEC that the largesse at American was revealed, right after flight attendants had agreed to reductions in their financial arrangements. They were justifiably upset, even though top salaries at American were not out of line. Indeed, Don Carty made less than CEO's at the four other major airlines and took a pay cut last month, according to Pamela Yip at the Dallas Morning News. Nor had the company paid bonuses to officers in the last two years. However, this was not the moment to resume them.
While corporations in this country struggle to regain their footing after the scandals at Enron and elsewhere and the missteps at American, their boards must reconsider what kinds of rewards make sense for management. Will they make such a move? Too many, I'm afraid, will not. Because they will believe, as Don Carty did, that the problem at American was untimely disclosure, not the privileged pension fund and ill-timed retention bonuses themselves.
As for American Airlines, the new leadership is lucky in its people. They have performed unfailingly well through a long siege of duress, beginning with September 11th, 2001. I love American. To me, it's our hometown airline and a vital part of our city. American means adventure, excitement, and frequent flyer miles. I'm pulling hard for the company to make it. And I, for one, never fly anything else.
Lee Cullum is a contributing writer for KERA and the Dallas Morning News. If you have opinions about this commentary, call 90.1's Listener Comment Line at (214) 740-9338 or contact us through our website at kera.org.