Sweetening the deal at United Airlines …
Merger talk is swirling around United Airlines (UAL), with reports of a deal in the works first with US Airways (LCC) and more recently with Continental Airlines (CAL).
We’re sure there are plenty of operational reasons United’s management might be looking for a deal. But we also couldn’t help noticing that the company has made it substantially more attractive for the top officers themselves to seal a deal — in the case of Chairman and Chief Executive Glenn Tilton, more than three times as attractive as in prior years.
According to the proxy that UAL Corp., parent of United Airlines, filed at 5:25 p.m. on Tuesday, Tilton’s payout if there’s a change of control rose to $9 million last year — up nearly fourfold from the $2.4 million listed in last year’s proxy. If he loses his job within two years after a deal, his payout would be $14.3 million, up 78% from $8 million last year.
Other executives have seen similar jumps. Executive Vice President John Tague, also president of United Airlines, would see his payout in a change-of-control rise to $3.7 million, from $1.1 million. Total cost for the top five officers under a change in control scenario, even if none of them are fired: $17.6 million.
A change of control, for what it’s worth, includes
“(i) certain acquisitions by a third-party or third-parties, acting in concert, of at least a specified threshold percentage of the Company’s then outstanding voting securities; (ii) consummation of certain mergers or consolidations of the Company with any other corporation; (iii) stockholder approval of a plan of complete liquidation or dissolution of the Company; (iv) consummation of certain sales or dispositions of all or substantially all the assets of the Company; and (v) certain changes in the membership of the Company’s board of directors. “
The rise in payouts hinges not on the cash severance the executives are promised — that figure has stayed pretty steady at a little over $5 million for Tilton, for example — but in the treatment of their equity and option grants. Whereas last year, getting fired after a merger would have accelerated $2.4 million in restricted stock awards for Tilton, now it would mean $1.4 million in restricted stock, $3.2 million in stock options and $3.6 million in restricted stock units, as well as $866,667 for an additional cash bonus. (Not to worry: They’ll still get travel benefits on their airline when they go, for whatever reason — a $23,683 value for Tilton, plus a whopping $119,240 to defray taxes that would be due on the benefit.)
All that, of course, is above and beyond what they get from any merger itself, in return for the shares and options they already own outright, plus the pensions and deferred-compensation benefits they have accumulated over time.
For good measure, the company also boosted the payout executives would get outside of a change-in-control, if they are fired “without cause” — including if, say, performance isn’t up to snuff or a deal falls through. For Tilton, that figure almost doubles to $12.6 million, from the $6.6 million listed in last year’s proxy. (His everyday pay rose, too.)
If UAL ultimately does tie up with another airline, we’re sure to hear soundbites about synergy and the value that shareholders and passengers can expect from the deal. As with any merger, only time will tell how much of that value really is there.
Meantime, for UAL’s top executives, the value of a deal is there in black and white.
Image source: Deanster1983 via Flickr
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Posted in Tags: proxy, severance |
 20 Comments » |
April 21st, 2010 at 11:30 pm
These guys have taken soo much. why stop now. what theives. the employees have been slammed so much and these guys keep taking. theives. no wonder the USA is in so much trouble…. CEO’s like this are so arrogent and greedy. they sell out there mother and country.
April 22nd, 2010 at 12:08 pm
17.6 million? What could our society do with this? Water all of NE Colorado for home grown farmers? Etc. Problem with the USA, immorality in the administrative ranks. The one commodity we could well afford to export. Send them to India! Undue the devastating effects of deregulating, reregulate!
April 22nd, 2010 at 12:37 pm
I love flying CO and hate UA. I hope CO stays independent. With all of the infighting
at UA’s unions, it will destroy CO.
April 22nd, 2010 at 4:22 pm
“With all of the infighting at UA’s unions, it will destroy CO?” Wow now thats interesting. I work at UAL and I didn’t realize we were all infighting. I do know that we all hate our management. Who wouldn’t!
April 23rd, 2010 at 2:57 pm
Doesn’t surpise me. SINCE Tilton PICKED the board of directors himself!!!
April 23rd, 2010 at 3:23 pm
So goes the ‘GAME’ of capitalism and hand picked Boards, its a SELF-HELP GAME. They help them ~ selves! Create the GAME and rules, DECLARE yourself THE HOUSE, scam others (employees and customers) with glamour, travel and stingy benefits ~ engage them with Big Marketing B.S. and voila a ‘cultural change’, because all despise you, they are glad to get rid of you. Some people are the so called salt of the earth, these clowns are rot of existence yet they consider themselves the elite of society, the Power Brokers of world and the movers and shakers. Nope! There are no consequences for these clowns! They are loners, wolves, not risk takers. Connected gypsies, tramps and thieves!
April 24th, 2010 at 10:16 am
Patrick, since you are such an expert UA and CO. Please tell me what you know about what has gone on at UA. Do you know why the employees are so upset? Do you know that every employee there has given up anywhere from 40%-67% of their pay? Do you know that they all lost their retirements? AT the same time the managements took huge bonuses while the company was driven into bankruptcy? Learn the facts pal.
April 24th, 2010 at 11:53 am
Glenn Tilton is a corporate pirate pure and simple! If he is allowed to stay on as any thing at the new Merged Airline there will be hell to pay for having this reincarnated Corporate thug named Frank Lorenzo. All you 1k Premeir Execs who think you are something will grow to hate this man as much as we do at United Airlines.
Captain Jeff Kleymann
United (we screw our employees) Airline!
April 24th, 2010 at 2:02 pm
Everyone please stop whining. We are Texans, we are Republicans, we are pro-business, pro-corporate and this merger will be a great deal for Continental and United. It will create the largest airline in the world and certainly the U.S. You sound like a bunch of Democraps.
CAL-Karen
April 25th, 2010 at 8:03 am
Well, CALKaren, that’s why the democrats are in power because look at the mess you Republicans have left us with! Yes, the merger would create the largest airline in the world, but anyone who knows about business, knows that companies with unhappy employees are not very successful companies.
April 25th, 2010 at 10:12 am
This is nothing more than a hijacking pure and simple. When the talk of merger mania starts, it runs the price of both stocks up and down. If you are an options trader or a day trader the talk is money in your pocket. If you are a long-term investor, you’re in the wrong industry sector!!! If Glenn and Doug and Kerry want to get their bonuses, they will get ‘em. Of course the boards are their allies. Of course the game is rigged for them to get lots of payouts. And of course, the game rules allow taking it out of the employees’ pockets.
But we all say, “it’s okay to do this…” If we want real change, the whole economy must grind to a dead stop. It won’t do that. These people make their money off the flow, not off the actual dollar count. Shut down the stream and the system will change. But I seriously doubt anyone is willing to tolerate that, even for one day. Heck, we can’t even turn our telephones off long enough to drive to the grocery store. These guys aren’t innovators, they just live off the work of others. Been that way for quite a long time. Wanna make real change? Tell the CEO’s to take their money and go. Someone new and just as messed up will step in and replace them. The smell of the money will corrupt them, too. Get over it, everyone. It’s just real life.
April 25th, 2010 at 11:25 am
CalKaren, you sound like a parrot just out of MBA school. Well, let me tell you, I also have an MBA and am a Flight attendant. Mergers do nothing but, reward the top executives and always end up with massive layoffs of the workers…(pilots, FA’s, ground staff, etc. etc). You must be 20 something, and have not a clue. Mergers sound good in theory, but, they always take their toll on the workforce. Maybe you will lose your job; unless you are a croonie of management. You’ll see, just wait. BTW I work for UAL, one of the worst companies for employee morale, and they deserve the status…..top management should all be put in jail in my opinion. Take money from the work force and line their pockets with the money….how can they live with that on their shoulders? Lack of conscience. BTW, CalKaren, largest does not mean the best. Take a look at SOuthwest…or Jet BLue.
April 26th, 2010 at 7:43 pm
Glenn Tilton rules United with this bad juju, that permeates the entire vibe of the business. Have you noticed the attitude of the employees lately? Two bankruptcy concessions and now that the contracts have expired, the company does not want to make up for their stealing from the workers by bringing pay up to prebankruptcy levels, but are counting their dollars in the even of a merge. It’s Tilton’s final hurrah as he exits with all the money he has stolen from United, on to a very rich retirement.
April 27th, 2010 at 10:44 am
You CAL employees had better pray that you don’t end up working for Glenn Tilton.
Fight it with everything you can. He is completely evil and cares nothing about the
company except for taking every dollar he can get away with. And the majority of
UAL employees are Democrats and proud of it. Deborah
April 28th, 2010 at 12:02 am
are you kidding me? i work for cal…..and nobody here wants ual or tilton in any way, shape or form (lorenzo reincarnated) we want to stay independent and carry on our good reputation and not be pulled down by ual’s bad rap. i’m sorry their employees had to suffer so much at the hands of corporate management, but dont want to be associated with poor management and morale.
April 29th, 2010 at 3:03 pm
No! You can not mix oil and water and expect it to stay together. Two
different cultures and ways of doing business. A merger will ultimately destroy both companies.
April 29th, 2010 at 4:59 pm
Im a laid off UAL employee now working at Continental..So far am enjoying my job at CAL. Its not all sunshine and roses there either but it is better ..I’m totally screwed if this goes through. United at bad as it is, I would probably go back if recalled ONLY because of seniority. And probably eventually be laid off again..thats their pattern. I have 12 yrs at UAL vs. 1 at CAL But if this merger goes through while Im still at CAL the post-merger downsizing would put me out on the street along with many of my co-workers too which is the lesser of the two evils……
April 30th, 2010 at 7:56 am
This merger is a nightmare. CO has a great reputation for service and quality — the exact opposite of what UA has, and for that I blame management. CO had Gordon and Larry for so many years, while UA had to deal with Tilton.
As for “CALKaren” — An airline isn’t Democrat or Republican… leave it to some idiot to throw politics into the mix. Yeah, I live in Texas too, but I’m not a Republican by ANY means, and it doesn’t matter. And CALKaren, all the people at the EWR hub (which is almost the same size as IAH) would like to differ with you about party affiliation.
More importantly, as other people have echoed, “CALKaren,” this merger is more than being “pro-business” and “pro-corporate” — it’s about supporting employees and customers. It’s about putting food on the tables of your families. When mergers happen, people lose jobs. Great for the CEOs, as the article points out, bad for the ramp, bad for the crews, bad for the CSA, res, etc. And eventually, bad for the customers who will experience bad service in the form of hold times, etc.
CALKaen, maybe you’re in the wrong field? Sounds like you should be crunching numbers in a faceless widget corporation somewhere.
July 6th, 2010 at 6:13 am
As a retired UAL Captain stripped of 30+ years of pension funding out of my own pocket by Tilton and his boys. I hope the merger fails purely to keep the EXO raiders from stealing more employee generated revenue….
September 23rd, 2010 at 9:25 pm
Slimsek is the most hated man at the cleveland int. airport. pure scum