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Category: Industry News
Date: 19 Dec 2005
Time: 15:16:29 -0500
Remote Name: 66.91.94.61
United's top execs stand to gain a lot By Marilyn Adams, USA TODAY United Airlines' creditors and two labor unions have asked a judge to block its exit from bankruptcy over a proposal to reward CEO Glenn Tilton and several hundred top executives with a 15% stake in the reorganized company. Under a proposed plan, 400 top executives of the Chicago-based airline would split $285 million worth of newly issued stock after the carrier exits bankruptcy. So far, management at the USA's No. 2 carrier has refused to make public how the stock would be awarded. After three years in Chapter 11, United hopes to exit as early as next month. Management revealed the outline of the plan in an earlier court filing. The lack of details has caused the matter to fester. In a Tuesday filing, non-secured creditors said the proposed stake for top managers is extraordinary, and they protested the refusal of management to spell out details. The creditors' committee wants management to get a smaller stake. In a Monday court filing, United's largest union, the International Association of Machinists, called the management stock plan "grotesque" in light of the billions of dollars in pay and benefits that United's rank-and-file workers gave up during restructuring. The IAM and the Association of Flight Attendants have asked the bankruptcy judge to reject United's reorganization plan unless the executive stock plan is scrapped. United's executive pay plan follows three years of painful cost cutting. Workers, most of whom are unionized, took pay and benefits cuts totaling more than $3 billion a year for five years. United also terminated all of its employee pension plans to reduce its debt. Thousands of workers were laid off. All the objections call the stock plan vague and excessive. Altogether, 18.7 million shares in corporate parent UAL would be reserved for senior managers. At a share price of about $15, the managers would divide $152 million upon exit, the rest later. United spokeswoman Jean Medina said the 15% share "is in line with market practices," citing a study by consultant Towers Perrin of 45 U.S. companies exiting bankruptcy. She said the company wants to resolve the problem but declined to say how. The dispute is unlikely to delay United's planned exit, Medina said. Boston bankruptcy lawyer Jon Schneider said awarding stock to top management is "very typical," but that the United proposal is generous. Usually the management stake in a reorganized company is 5% to 10%, he said. "Fifteen percent is outside the norm, and it's 15% of a very big company," he said. Chicago federal bankruptcy Judge Eugene Wedoff has scheduled a hearing for Jan. 18.