Leaving some wiggle room at United …

When United Airlines (UAUA) and Continental (CAL) were rumored to be tying up, we took a look at the sweet change-in-control benefits that United executives stood to receive. After some brouhaha, it was announced that United’s chairman and chief executive, Glenn Tilton would forego big chunks of that, which got a little attention as well.

Last week, Continental filed its merger proxy, and sure enough, there’s Tilton’s sacrifice — along with some other details that make us wonder how much of a hardship it’ll really prove to be in the long run.

As the companies had promised, Tilton is giving up cash severance (valued at $4.6 million in the merger proxy), acceleration of vesting for stock options ($3.9 million) and restricted stock ($8.7 million). But he’ll get new restricted shares in lieu of the cash and restricted stock, and his options will all vest within two years (unless he’s fired for cause or quits without a good reason before then). Since he’s slated to stay on as non-executive chairman for two years, this seems less like a big hardship than like a little delayed gratification.

Which brings us to the question of his compensation going forward. And for that, we have to leave you with a big fat question mark: It hasn’t been set yet. More curiously, Tilton’s new pay deal won’t be negotiated between him and the new company’s board, but between him and a committee of United’s existing board. Here’s the merger proxy:

“Prior to the completion of the merger, UAL is permitted to set Mr. Tilton’s compensation package as non-executive chairman of the board of the combined company, subject to the review and consent process agreed upon in the merger agreement.”

Continental’s board gets a sort of veto power; it “will have the opportunity to request changes to Mr. Tilton’s compensation package, and in such a case,” the two companies “will work together to negotiate such changes.” But for the most part, Tilton will be negotiating with the board he’s worked with for years. It’s arguable just how much that board has in the way of accountability to shareholders going forward.

In any case, before we get too worked up about Tilton’s big sacrifice, we’ll wait and see what his new employment agreement looks like. It could make all the difference.


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