Publicly traded companies make a big deal out of efficiency, which typically implies watching every penny and avoiding unnecessary costs. So what to make of the separation agreement that United Continental Holdings (UAL) filed on Tuesday?

United Continental certainly talks the talk — during the Q&A in its latest earnings call, Chief Financial Officer Zane Rowe assured analysts that “the teams are all working quite aggressively at managing expenses” (among other paeans to synergy, cost savings and efficiency on the call). And the company predicted $1 billion a year in cost savings as a result of the merger consummated last fall.

Yet, in the separation agreement the company filed for former Chief Information Officer R. Keith Halbert (also referred to in other documents as Keith R. Halbert), who left as of April 30, the company acknowledges promising him money and benefits that it apparently didn’t have to. (No surprise: United Continental is something of a frequent flier in our pages.)

Severance and post-employment benefits, of course, tend to go to people forced out against their will, or who leave for such “good reason” as a demotion, salary cut or significant headquarters move. United Continental doesn’t appear to have explained the reasons for Halbert’s departure — nor does Crain’s Chicago Business, which reported the news on Tuesday — but the separation agreement itself notes that his departure

“shall be treated as a resignation by Employee pursuant to paragraph 2.2 under the Employment Agreement, and shall not constitute an Involuntary Termination or a Good Reason Termination (as such terms are defined in the Employment Agreement).”

That seems clear enough. Checking back to his “employement agreement”, dated October 1 and filed February 22, we find that this kind of departure would ordinarily entitle him to little more than salary through his departure date, any bonuses already earned but not yet paid (eg, for 2010), cash in lieu of unused vacation, and business expenses that haven’t yet been reimbursed. That pretty much amounts to what the company would have to pay him anyway, though he and his wife also qualify for free flights for the rest of his life, and tax reimbursement on the benefit, under the company’s Officer Travel Policy (as long as he isn’t fired for cause).

Sure enough, the separation agreement promises him those flight benefits. Yet Halbert is getting considerably more, including $3 million in cash, with two thirds of it paid out more or less immediately, and the rest paid over 13 regular payroll periods. He also gets “welfare benefits” — also known as medical, dental, life-insurance, vision and prescription-drug coverage — through December 31, 2012.

Plus, Halbert gets a nice exclusive consulting contract, at $750 an hour for up to 1,000 hours, though he won’t have to work more than 20% of his old hours each week.

This isn’t the first time we’ve highlighted a company paying unnecessary severance. Back in mid-October, for example, we footnoted the decision by Choice Hotels (CHH) to pay a departing senior vice-president 18 months’ salary and a bonus — plus “certain legal expenses” left cryptically undetailed — despite acknowledging that the departure was without “good reason” (and thus not eligible for severance under the executive’s standing agreements).

All in all, it’s the kind of thing that shows why we think more disclosure — or clearer explanation, at any rate — is a good thing. There may be all kinds of innocent explanations for sidestepping an existing employment agreement and giving what looks like a severance payment even while acknowledging it isn’t required. Unfortunately, companies rarely bother to explain.

Instead, investors who take the trouble to figure out what’s going on are left scratching their heads — and that does them, and the departing executives, a real disservice.

Image source: jerandsar via flickr

Posted in My big fat deal Tags: 10-Q, executive exits, frequent flier

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