By Merrie Spaeth, KERA 90.1 Commentator
http://stream.publicbroadcasting.net/production/mp3/kera/local-kera-496707.mp3
Dallas, TX –
American Airlines' unions just blasted so called "bonuses" for top executives. I was ready to get on my high horse. I'm firmly against executive "bonuses" for companies asking their own employees for sacrifices.
It turns out, this is an example of the impact of the choice of words. After investigating, I've come to the conclusion that American's side of the story is correct. This is the result of a formula where about one thousand of American's executives and managers had part of their pay deferred and linked to how well the stock was doing. In effect, they "loaned" American part of their compensation, to be paid back in the future if the company did better. The arbiter of "did better" was the price of the shares.
As an aside, how well the stock does is an important indicator of the airline's long term health. An increasing share price means people want to invest in American, providing capital to upgrade, expand and so on.
The confusion and controversy is a result of several things. First, the size of the whatever-we-call them. A million dollars seems like a lot of money to those of us who aren't getting paid it. Second, the whatever-they-ares came as a surprise - whether they should have or not. It's actually been in place for a decade. Remember CEO Gerard Arpey also required a substantial pay cut from the same managers in 2003. And as I said at the start, specific words have a lot of power. I remember when I worked for Republic Bank here in Dallas. The bank was in horrible trouble - in large part caused by its own leadership and they gave themselves performance bonuses.' I left. But the pilots and flight attendants can't. Because of seniority rules and industry conditions, they're lifers whether they want to be or no. But executives can bail.
Companies frequently falsely justify executive salaries by saying they're needed to retain management talent. But American has seen a number of people leave for industries in less trouble.
So, what to call these things? You could say that the executives took a chance and gambled that they could improve American's performance. But that would make the money "winnings," what you get if you gamble and win. That's worse than bonuses. Since the company is making good on what are in effect "loans," they are repayments or reimbursements.
I know they have infuriated my friends in the American's Pilots Association, individuals who are among the world's most highly trained professionals. I put my life in their hands at least twice a week. But my advice is: this isn't the same as when former CEO Don Carty tried to hide $20 million in real bonuses in small print in a SEC filing. These are much more legit. And, don't succumb to the curse of "it seems like a big number." Remember all those editorial board meetings we went to in the mid '90s because Bob Crandall was saying that pilots made $200,000 a year so the image of pilots as over paid was fixed in people's minds. An Eagle pilot can make as little as $20,000. Did you know that?
American is a viable company which has made great strides towards profitability and better relations with all its key audiences. We in Dallas all fervently hope these trends will continue. So it would be helpful if we had a thoughtful reconsideration of what's really going on. It would be, well, a bonus.
I'm Merrie Spaeth .