It's a good thing that Donald J. Carty, the chairman and chief executive of American Airlines, doesn't also pilot one of its planes. If he did, and if the plane went into an uncontrolled dive and he handled it the same way he's running the company, he'd bail out as the plane fell to earth, drift dreamily down on a golden parachute, land lightly amid the carnage and give himself a nice cash bonus for coming through unscathed.
Over the past week it has become clear that Carty has engaged in the same kind of double-dealing, to conceal the same kind of double standards, that last year made his fellow Texan and CEO Ken Lay a household name.
While Carty was convincing American's pilots, mechanics, flight attendants and baggage handlers that they had to accept major pay cuts (ranging from 15.6 percent to 23 percent, and kicking in on May 1) if the airline was to avoid bankruptcy, he was secretly crafting a "retention bonus" for American's top seven executives that would reward them for staying at their posts until 2005. The bonuses, all but one set at twice these executives' annual salaries (Carty's would total $1.6 million), weren't keyed to performance -- a prudent proviso, because American lost $5.3 billion in 2001-02 and things aren't exactly looking up yet. Instead, they seem to derive from the maxim of business guru Woody Allen, who once noted that 90 percent of life is just showing up. Carty's corollary is that if you run the company, just being there can be grounds for doubling your pay so long as nobody's on to you.
Nor was this all. Even as top American executives were telling the pilots that the company would eliminate their pension plans if it had to file for bankruptcy, Carty and his crew had secretly created a special pension trust for the company's top 45 executives that no creditor could even touch during a bankruptcy proceeding. More wondrous still, Carty and three other top honchos were to be paid extra for administering this trust.
It gets worse.
These marvelous new provisions had to be included in American's year-end report to the Securities and Exchange Commission, but the company managed to get an extension from the SEC to delay the filing. Throughout April, American's workers were voting on whether to accept these pay concessions to stave off bankruptcy. Voting was to have wrapped up last Tuesday, and on Tuesday night, in the apparent belief that all three unions had accepted the cuts, the company finally released the report. In fact, the flight attendants had narrowly voted to reject the givebacks, so the polls were kept open Wednesday until a majority had voted yes.
Then the polls closed, not a moment too soon for management. As news of the secret deals spread, those American workers still grappling with the details of their Easter pageants had a casting director's epiphany: In a pinch, Donald J. Carty would make one swell Judas. On Thursday, leaders of one of the unions told Carty they might not sign the agreements that their members had, in all deliberate ignorance, ratified. Democratic members of Congress were rumbling too, and with American slated to receive $410 million from the emergency appropriation that Congress just enacted, Carty had to backtrack -- a little. He has now announced that the top seven execs won't be getting that retention bonus after all. The special pension plan for the special 45, however, will stay in place.
The real problem, of course, is that Don Carty isn't all that exceptional among his fellow corporate statesmen -- certainly not at many of the major airlines. Over at Continental, CEO Gordon Bethune pulled down a handsome $14.7 million last year -- a 172 percent increase over 2001, though the company lost $451 million. At Delta, chief executive Leo Mullin got himself paid $13.8 million -- a 104 percent increase over 2001, though Delta lost $1.27 billion. In this quadrant of American capitalism, at least, there is indeed a relation between executive pay and company performance. It's inverse.
Or maybe there's a special problem with Texas CEOs. I know a former CEO of Halliburton Co., now the No. 2 in a larger concern, who keeps arguing that the public's legal right to oversee public business does not pertain to the topmost public executives when they meet to make energy policy and who knows what else. Then there's Dick Cheney's boss, who's out stumping for a budget that will force state governments to increase class sizes and cut medical care but will reward the richest 10 percent of Americans with massive tax cuts.
When these guys think of shared sacrifice, the saps get the sacrifice and they get the shares.
The writer is editor at large of the American Prospect.