When You Fly in First Class, It's Easy to Forget the Dots
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Oops, didn't realize the whole article wouldn't be linked.
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DCT JVL
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- Oct 7, 2002
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If you're gonna post the "Bug Me Not" sign-in, why not just go ahead and post the article? Same difference.
I wonder if this is written by the same Ben Stein from "Win Ben Stein's Money" and "Ferris Bueller's Day Off"? Since they note he is an actor and economist, I would assume it is. He is a conservative and a Republican. I like that he has this take on the UAL mess. It helps vindicate my position as a union card holder and a Republican.
Everybody's Business
When You Fly in First Class, It's Easy to Forget the Dots
By BEN STEIN
Published: January 29, 2006
ONE of the best conspiracy movies ever made is the perfect British classic, "The Third Man." In the most haunting scene, the villain, played adroitly by Orson Welles, takes Joseph Cotten, the good guy, up in a Ferris wheel. The villain, named Harry Lime, has been selling adulterated penicillin in postwar Vienna, making a fortune and causing children to become paralyzed and die.
Philip Anderson, Mr. Cotten's character, a pulp fiction writer named Holly Martins, asks him how he could do such an evil thing for money. The two men are at the top of the Ferris wheel, and the people below them look like tiny dots. Mr. Welles's villain looks down and says, "Tell me, would you really feel any pity if one of those dots stopped moving forever? If I offered you £20,000 for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare?"
This scene comes to mind when I think of Glenn F. Tilton and other executives of the UAL Corporation and the hapless employees of its primary business, United Airlines. Its history is a perfect text for the ethical morass in which American business often finds itself.
United is one of the proudest names in airline history. It has long been a synonym for fine service and extensive, convenient routes. In the early 1990's, when some investment bankers were casting around for a way to make tens of millions of dollars, they came up with a doozy: the employees of UAL would give up some of their salaries and benefits in exchange for stock in UAL, eventually becoming UAL's largest owner through an employee stock ownership plan.
The deal went through — with staggering compensation to Wall Street — and in 1994 the American employees of UAL, as a group, became its largest owners. Within a few years, overseas personnel were allowed the privilege of tossing their life savings into UAL, too.
Trouble was not far behind. The employees found management demanding pay cuts, big (and, for passengers, inconvenient) changes and cuts in scheduling and services, and even silly changes in their once-great flight attendant uniforms. Then came the blows of 9/11 and a recession, and then rising fuel costs. There were demands for more cuts in pay and benefits and more layoffs. That was not enough. About three years ago, UAL was "forced" to enter bankruptcy to stay alive.
This step meant that UAL could drastically cut workers' pay — and it did. Pensions were simply jettisoned and made the burden of the federal government's Pension Benefit Guaranty Corporation, which meant cuts of close to two-thirds in some pilots' pension payments. And, of course, the bankruptcy simply eliminated all of that equity in UAL that the employees had bought with their hard-earned savings.
Thus, in a series of evil events, management of UAL basically ruined the lives of the employee-owners, if that is not putting too fine a point on it, by taking away their savings, incomes and pensions. (I am indebted to my pal, Phil DeMuth, for much of this research.)
All right, you might say. What else could management have done amid high fuel costs and a deregulated, supercompetitive market? That's "creative destruction," and it's good for the economy, some of my fellow Republicans and admirers of the free market might say. But what about the rules of law and common decency? Because, you see, there is a bit more to the story.
Now UAL has been reorganized. It is preparing to emerge from bankruptcy. It will soon have a stock offering. This offering is expected to raise very roughly $6 billion. It is presumably worth that because UAL now has such low labor costs that it may actually make a profit of some size. (I'll believe it when I see it.)
Here comes the good part: management has asked the bankruptcy court to let it have — free — roughly 15 percent of the stock in the new company, or about $900 million. Mr. Tilton, the chief executive, who plays the Orson Welles character in this drama, would get about $90 million personally for his hard work shepherding UAL through bankruptcy (for which he was already paid multiple millions of dollars).
The bankruptcy court, instead of ordering Mr. Tilton's arrest, instead cut the management share to about 8 percent, so he will get more than $40 million, more or less. That is more than Lee R. Raymond, the chief executive of Exxon Mobil, one of the most successful companies of all time, was paid in 2004 (not counting Mr. Raymond's 28 million shares of restricted stock).
So here it is in a nutshell: employees are goaded into investing a big chunk of their wages and benefits in UAL stock. They lose that. Then they lose big parts of their pay and pensions. They become peons of UAL. Management gets $480 million, more or less. "Creative destruction?" Or looting?
Wait, Mr. Tilton and Mr. Bankruptcy Judge. The employees were the owners of UAL. They were the trustors, and Mr. Tilton and his pals were trustees for them. How were the trustors wiped out while the trustees, the fiduciaries, became fantastically rich? Is this the way capitalism is supposed to work? Trustors save up, and their agents just take their savings away from them?
If the company is worth so much that management has hundreds of millions coming to them, shouldn't the employee-owners get a taste? Does capitalism mean anything if the owners of the capital can be wiped out while their agents grow wealthy? Is this a way to encourage savings and the ownership society? Or is this a matter of to him who hath shall be given?
I know that this is basically the same story I described recently concerning the Delphi Corporation, where something similar is going on. But that's exactly the point. Management is using competition, higher fuel costs and every other cost complaint to cut the pay and pensions of its own employees while enriching itself.
And I can well imagine what goes through Mr. Tilton's mind as he does it: "Hey, I'm a great executive. Great executives in private-equity firms make more than I do. Why shouldn't I get the moolah? Basically, I've worked it so UAL is now a private-equity deal anyway. That's what it's all about now, isn't it? Who's got the most at the end of the day at Bighorn or the Reserve or whatever golf course I choose to retire at? And, anyway, wouldn't you take $48 million for a few of those dots we used to call our employees and owners to stop moving?"
Ben Stein is a lawyer, writer, actor and economist. E-mail: [email protected].
I wonder if this is written by the same Ben Stein from "Win Ben Stein's Money" and "Ferris Bueller's Day Off"? Since they note he is an actor and economist, I would assume it is. He is a conservative and a Republican. I like that he has this take on the UAL mess. It helps vindicate my position as a union card holder and a Republican.
Everybody's Business
When You Fly in First Class, It's Easy to Forget the Dots
By BEN STEIN
Published: January 29, 2006
ONE of the best conspiracy movies ever made is the perfect British classic, "The Third Man." In the most haunting scene, the villain, played adroitly by Orson Welles, takes Joseph Cotten, the good guy, up in a Ferris wheel. The villain, named Harry Lime, has been selling adulterated penicillin in postwar Vienna, making a fortune and causing children to become paralyzed and die.
Philip Anderson, Mr. Cotten's character, a pulp fiction writer named Holly Martins, asks him how he could do such an evil thing for money. The two men are at the top of the Ferris wheel, and the people below them look like tiny dots. Mr. Welles's villain looks down and says, "Tell me, would you really feel any pity if one of those dots stopped moving forever? If I offered you £20,000 for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare?"
This scene comes to mind when I think of Glenn F. Tilton and other executives of the UAL Corporation and the hapless employees of its primary business, United Airlines. Its history is a perfect text for the ethical morass in which American business often finds itself.
United is one of the proudest names in airline history. It has long been a synonym for fine service and extensive, convenient routes. In the early 1990's, when some investment bankers were casting around for a way to make tens of millions of dollars, they came up with a doozy: the employees of UAL would give up some of their salaries and benefits in exchange for stock in UAL, eventually becoming UAL's largest owner through an employee stock ownership plan.
The deal went through — with staggering compensation to Wall Street — and in 1994 the American employees of UAL, as a group, became its largest owners. Within a few years, overseas personnel were allowed the privilege of tossing their life savings into UAL, too.
Trouble was not far behind. The employees found management demanding pay cuts, big (and, for passengers, inconvenient) changes and cuts in scheduling and services, and even silly changes in their once-great flight attendant uniforms. Then came the blows of 9/11 and a recession, and then rising fuel costs. There were demands for more cuts in pay and benefits and more layoffs. That was not enough. About three years ago, UAL was "forced" to enter bankruptcy to stay alive.
This step meant that UAL could drastically cut workers' pay — and it did. Pensions were simply jettisoned and made the burden of the federal government's Pension Benefit Guaranty Corporation, which meant cuts of close to two-thirds in some pilots' pension payments. And, of course, the bankruptcy simply eliminated all of that equity in UAL that the employees had bought with their hard-earned savings.
Thus, in a series of evil events, management of UAL basically ruined the lives of the employee-owners, if that is not putting too fine a point on it, by taking away their savings, incomes and pensions. (I am indebted to my pal, Phil DeMuth, for much of this research.)
All right, you might say. What else could management have done amid high fuel costs and a deregulated, supercompetitive market? That's "creative destruction," and it's good for the economy, some of my fellow Republicans and admirers of the free market might say. But what about the rules of law and common decency? Because, you see, there is a bit more to the story.
Now UAL has been reorganized. It is preparing to emerge from bankruptcy. It will soon have a stock offering. This offering is expected to raise very roughly $6 billion. It is presumably worth that because UAL now has such low labor costs that it may actually make a profit of some size. (I'll believe it when I see it.)
Here comes the good part: management has asked the bankruptcy court to let it have — free — roughly 15 percent of the stock in the new company, or about $900 million. Mr. Tilton, the chief executive, who plays the Orson Welles character in this drama, would get about $90 million personally for his hard work shepherding UAL through bankruptcy (for which he was already paid multiple millions of dollars).
The bankruptcy court, instead of ordering Mr. Tilton's arrest, instead cut the management share to about 8 percent, so he will get more than $40 million, more or less. That is more than Lee R. Raymond, the chief executive of Exxon Mobil, one of the most successful companies of all time, was paid in 2004 (not counting Mr. Raymond's 28 million shares of restricted stock).
So here it is in a nutshell: employees are goaded into investing a big chunk of their wages and benefits in UAL stock. They lose that. Then they lose big parts of their pay and pensions. They become peons of UAL. Management gets $480 million, more or less. "Creative destruction?" Or looting?
Wait, Mr. Tilton and Mr. Bankruptcy Judge. The employees were the owners of UAL. They were the trustors, and Mr. Tilton and his pals were trustees for them. How were the trustors wiped out while the trustees, the fiduciaries, became fantastically rich? Is this the way capitalism is supposed to work? Trustors save up, and their agents just take their savings away from them?
If the company is worth so much that management has hundreds of millions coming to them, shouldn't the employee-owners get a taste? Does capitalism mean anything if the owners of the capital can be wiped out while their agents grow wealthy? Is this a way to encourage savings and the ownership society? Or is this a matter of to him who hath shall be given?
I know that this is basically the same story I described recently concerning the Delphi Corporation, where something similar is going on. But that's exactly the point. Management is using competition, higher fuel costs and every other cost complaint to cut the pay and pensions of its own employees while enriching itself.
And I can well imagine what goes through Mr. Tilton's mind as he does it: "Hey, I'm a great executive. Great executives in private-equity firms make more than I do. Why shouldn't I get the moolah? Basically, I've worked it so UAL is now a private-equity deal anyway. That's what it's all about now, isn't it? Who's got the most at the end of the day at Bighorn or the Reserve or whatever golf course I choose to retire at? And, anyway, wouldn't you take $48 million for a few of those dots we used to call our employees and owners to stop moving?"
Ben Stein is a lawyer, writer, actor and economist. E-mail: [email protected].
There is truth in the article of course. Glenn Tilton doesn't care about any of us, nor should he. He was hired for one, single purpose; to guide United Airlines through bankruptcy and emerge intact. The man did his job exactly as he was hired to do, nothing more or less. For that he should be compensated and will be. His job was so daunting that most analysts and airline employees suspected that United airlines was about to be part of the history books. Hours and hours were spent on message boards just like this dividing up and throwing away pieces of our once proud airline.
We kept all the pieces of value and dropped the non valueable parts, we took more than our fair share of personal cuts, we listened to the constant gloating of our conterparts as they cicrcled us like a death watch so they could scoop down and pick at the bones.
So for those that don't believe Glenn Tilton did anything in his years of employment here at United and that he doesn't deserve to leave with the types of bonuses he is leaving with, then you weren't paying attention. We are only in business and you only have a job because of this man. Like him or not.
We kept all the pieces of value and dropped the non valueable parts, we took more than our fair share of personal cuts, we listened to the constant gloating of our conterparts as they cicrcled us like a death watch so they could scoop down and pick at the bones.
So for those that don't believe Glenn Tilton did anything in his years of employment here at United and that he doesn't deserve to leave with the types of bonuses he is leaving with, then you weren't paying attention. We are only in business and you only have a job because of this man. Like him or not.
OP
Some Clown
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[quote name='Fly' date='Jan 29 2006, 02:10 PM'
I'm glad he did his job and that UAL is still in business. I just hope management doesn't come around with the collection plate for the employees that remain...
I'm glad he did his job and that UAL is still in business. I just hope management doesn't come around with the collection plate for the employees that remain...
jimntx
Veteran
Well, no it's not. It's one thing to give someone your free logonid to a website. It's quite another and a violation of Federal copyright law to copy an entire article from another publication and post it without permission or attribution on another website or in another publication.
I know you are going to say, "yeah, so sue me. The Times doesn't know who I am." Just be aware that you can get USAviation.com in legal trouble, and USAviation.com can be forced to reveal who you are in a lawsuit.
DCT JVL
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It isn't your login, it is a fake one designed to allow people to log on to a free site without providing personal information. So you provide a login that allows people to represent themselves falsely to circumvent the NYT requirement of registration, I post the whole article to circumvent the NYT's ridiculous login requirement. Again, I fail to see the difference.
I wouldn't dare post a NYT article if it came from a subscription page, because that would cause problems. It is also why I chastise people who post pieces of Planebusiness.com, because that is a by subscription newsletter.
In any case, I'm sure the mods know best. If we are risking some sort of copyright violation, take the article off.
jimntx
Veteran
Everything on the NYTimes website is copyrighted because it is first published in the newspaper itself. There is very little content on their website that is only on the website.
But, then I'm sure you know better than anyone else including the USAviation.com staff. They have asked time and time again that members not post entire articles from other websites for legal and space reasons.
But, then I'm sure you know better than anyone else including the USAviation.com staff. They have asked time and time again that members not post entire articles from other websites for legal and space reasons.
DCT JVL
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- Oct 7, 2002
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Fly,
I am a fan of Tilton. Although I can't agree with your suggestion that we only have a job because of Tilton and Tilton alone(I seem to remember some concessionary union contracts). Tilton deserves a bonus, I don't think many would begrudge him that, it is the size of the bonus that people are complaining about.
Here's what I posted in this thread:
Sarcasm duly noted, although I thought the the last sentence in my post regarding this issue said it best.
Everyone has taken paycuts, that's a no brainer. Our paycuts did not turn around the company. The people who controlled what we sold, what we negotiated and what we changed in routes are who changed this airline. We were desperate pawns hoping to keep our jobs and keep our seniority. Nothing more. If it had been different we all would have headed to the first airline hiring.
U
UAL_TECH
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dc3fanatic
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- Mar 17, 2005
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Wow! What an incredibly one-sided article. Did the unions pay for that little piece of selective fiction?
WorldTraveler
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- Dec 5, 2003
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I can't believe I missed this post....glad it was resurrected so I could see it. I had to take a quick look at the bottom to make sure I didn't write it.
Fly,
I truly feel sorry for you if you think you have to be personally torn apart in order for UA to turn around. It is precisely those companies that recognize the value of their people that successfully emerge from bankruptcy and become viable competitors again, not those that look for every opportunity to rape and pillage and then convince the people that was necessary.
Fly,
I truly feel sorry for you if you think you have to be personally torn apart in order for UA to turn around. It is precisely those companies that recognize the value of their people that successfully emerge from bankruptcy and become viable competitors again, not those that look for every opportunity to rape and pillage and then convince the people that was necessary.
