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Category: Industry News
Date: 14 Jan 2006
Time: 20:22:14 -0500
Remote Name: 66.91.94.61
Posted on Fri, Jan. 13, 2006 United unions object to exec awardsWorkers cry foul over $45 million stock packageBY LYNNE MAREKBloomberg News United Airlines unions objected to the company's plan to give its eight top executives $45 million in stock after the carrier emerges from bankruptcy, calling the proposal unfair to workers. Chief Executive Officer Glenn Tilton would get $15 million of the stock, according to a consultant's review of a United plan obtained by Bloomberg News. United, a unit of UAL Corp., said Wednesday its board approved the proposal. The company is seeking to exit its 3-year-old bankruptcy in February. "The members find it gross and disgusting that United executives are going to benefit from the workers' sacrifices," said Joe Tiberi, a spokesman for the International Association of Machinists, which represents bag handlers and customer service agents at the carrier. United, the world's second-biggest airline, is trying to win union and creditor support for a reorganization plan before Jan. 17, when it submits the proposal to U.S. Bankruptcy Judge Eugene Wedoff in Chicago. The Elk Grove, Ill.-based carrier reduced the proposed stock grant in the plan during the past month in response to objections from creditors and unions. "The dollar value of these grants is theoretical, and by no means guaranteed," UAL spokeswoman Jean Medina said in an e-mail. It depends upon the "performance of United's stock. It's in everyone's interests for management to have this component of compensation tied to the future of United's stock price." The proposal would set aside 13.6 million shares, or an 11 percent stake in the company, for 400 executives, down from a previous plan to reserve 15 percent. Tilton's current award would give him 1.1 percent. "This seems reasonable in comparison to what has been done in other large public company cases," said Lynn LoPucki, a University of California Los Angeles law professor who specializes in bankruptcy law. Some executives at bankrupt companies get more than that just for winning a judge's approval of a plan, and don't have a vesting period to encourage them to stay at the company, LoPucki said. United's bag handlers and flight attendants said the new plan was unfair in light of $4 billion in employee pay and benefit concessions provided to help United survive during bankruptcy. The carrier's pilots union Thursday reiterated opposition voiced against the initial plan last month. Air Line Pilots Association union Chairman Mark Bathurst on Dec. 31 called the proposed awards "extraordinary riches." Executives shouldn't be rewarded until they can show they've carried out their five-year business plan for the company, said Richard Turk, a spokesman for the airline's mechanics union, the Aircraft Mechanics Fraternal Association. Tilton would get 822,000 stock options and 545,000 restricted shares, during the four years, according to the document, titled "Declaration and Expert Report of Douglas J. Friske in Support of the Management Equity Incentives Plan." "The notion of shared sacrifice does not seem to have been considered at all in the Friske report," Thomas M. Jones, a consultant who reviewed the stock proposal for United's Association of Flight Attendants, said in a report for the union. The value of the stock grants assumes that shares of United will trade at $15.20, with restricted stock to be valued at $13.75 and an option at $9.12, according to the Friske report. Tilton would receive $605,625 in annual compensation under the reorganization plan and have the ability to double that with an annual bonus, according to a separate filing Wednesday.