Turbulence Over Executive Pay

United Airlines pilots protested this month at Reagan National Airport. United gave its CEO more than 1.3 million shares of stock and options last year.
United Airlines pilots protested this month at Reagan National Airport. United gave its CEO more than 1.3 million shares of stock and options last year. (By Win Mcnamee -- Getty Images)
By Del Quentin Wilber
Washington Post Staff Writer
Tuesday, May 22, 2007

FORT WORTH -- American Airlines executives should have been celebrating last week during their annual stockholders' meeting, the first in six years at which they could spotlight an annual profit.

Instead, chief executive Gerard J. Arpey spent much of the session fending off questions from irate employees. After agreeing to accept massive pay cuts in recent years to keep American flying, the employees said they were upset that the carrier's top officers have been given stock-based bonuses worth millions of dollars. One employee at the meeting called Arpey and other executives "arrogant, greedy, selfish and heartless individuals."

The anger over airline leaders' pay is not unique to American. Employees who have taken pay cuts at United and Northwest airlines and US Airways are also battling their executives over similar deals.

Labor groups say the unhappiness has led to at least two showdowns with managers over contractual issues. Some say demoralized workers could also hurt service.

"When you have a bitter and angry workforce, that translates into a rough-and-tumble summer travel season," said Edward Wytkind, president of the AFL-CIO's Transportation Trades Department, an umbrella organization that lobbies on behalf of airline unions.

The executives and their representatives all defended the deals, saying the bonuses were granted for solid performance. The companies say much of their executives' compensation is in the form of stock grants, which could lose value if the airlines perform badly or rise if they sustain their recoveries. They also note that the companies' boards, not the executives themselves, set the compensation levels.

During American's annual stockholder meeting, Arpey said that the $160 million in stock awards given to top executives and managers was a motivational tool that helped keep the carrier out of bankruptcy.

Arpey, who made a little more than $6 million last month when he sold his stock awards, noted that the carrier preserved its workers' pensions and that employees also have benefited from rising stock prices. They were given 38 million stock options in 2003.

"This may be an issue on which we may have a hard time finding common ground," Arpey told the shareholders and workers.

Other airline bosses are also reaping bonuses for helping turn carriers around. Glenn F. Tilton, United's chief executive, received 545,000 shares of United stock, worth about $20 million, last year that will vest over four years. He also was granted more than 800,000 stock options, which could prove lucrative if the carrier's stock price climbs.

Northwest, which was granted court approval last week to exit bankruptcy protection, announced recently that its chief executive, Douglas M. Steenland, received stock and options worth more than $20 million that will vest over four years. Meanwhile, W. Douglas Parker, chief executive of US Airways, was given cash bonuses and stock grants worth about $4.8 million last year, according to SEC filings.

Worried about employee reaction to the payout at a time of slumping performance, Parker sent workers an e-mail last month to address why "many of you are wondering how I could be paid so much when our airline is doing so poorly right now."

CONTINUED     1        >

© 2007 The Washington Post Company