Greed is Good

[Hopeful]

IF GREED IS GOOD, AMERICAN IS GREAT

At Wednesday's shareholder meeting, I held a list of names in the air. The page was taken from the AMR 10K filing from the year 2003. The list contained the names of all the participants in the Don Carty bankruptcy proof Trust. I read the names of the following participants aloud:

Gerard Arpey
Dan Garton
Gary Kennedy
Lauri Curtis
Ralph Richardi
Chuck MarLett
Will Ris
(The complete list as it appears in Schedule A of the 10K is posted below).

These are the people who demanded life-altering concessions from us while they protected their own ASSets under a trust.

I see no difference in the Don Carty group and those currently in office. Same names. Same self-serving objectives. The only difference is that the current group of executives have achieved and brought to fruition what Don Carty only attempted. 74% of our 2006 revenue was consumed by executive bonuses.

Clearly, the legacy airline (that we devoted a lifetime of service to built and to save from bankruptcy) is being sustained on life support as a donor machine for executive compensation.

The SEC filings for the fiscal year ending December 31, 2003, contain Severance Package information for Don Carty and others. As employees suffered substantial sacrifices in 2003, in salaries, vacations, sick time, work rules, health care and more; management compensation was a stark contrast.

The following terms of agreement appeared to be fairly standard in the 2003 10K. However, actual compensation varies based upon the terms negotiated by each individual executive.

1. Stock Options: You may continue to exercise any stock options that are vested. All unvested options will continue to vest into retirement according to their original vesting schedule. You may continue to exercise these options through the original ten-year term of each grant. (Employees LOSE their options if they leave before exercising them.)

2. Performance Shares: Protected.

3. Career Equity: Vesting of your career equity shares will be accelerated and you will receive 100% of the shares originally granted to you. These shares will become immediately payable upon “retirementâ€￾.

4. Brokerage Commissions: American will pay the brokerage commissions on any stock options you exercise through American's preferred broker.

5. Incentive Compensation: protected.

6. Pension Benefit: Pension benefits will be payable from two sources-the Retirement Benefit Plan (RBP) and the Supplemental Executive Retirement Program (SERP).
Note: SERP was started because ERISA has a cap on the RPB. Most of our executives receive two years of pension credit for every one-year served. Some are granted “additional years of ageâ€￾. SERP offers a lump sum payment.

7. Deferred Compensation: Protested

8. Special Payments: Mike Gunn received a severance payment of $1,040.00, which represented 2X his annual base salary and a lump sum cash payment for unused vacation. Special payments of execs vary based on their agreements.

9. Split Dollar Life insurance: The company will pay the remaining premiums on the policy.

10. Annual Physical: American will pay for their annual physicals. (But, our line female workers aren't even covered for an annual pap test.)

11. Equipment: You will be able to keep the office equipment (i.e. fax and pc) in your home for personal use. (AA deducts a $5 change fund from our last check.)

12. Automobile: You have the option to purchase the vehicle (that we leased for you).

13. Financial and Tax Planning: American paid for the financial and tax planning services for Robert Baker upon his retirement.

14. Travel: You will be issued retiree A2 travel for you and your spouse, a lifetime Admiral's Club Membership and a UATP card. In January of each year the company will send you a 1099-misc that reflects as “incomeâ€￾ the value of the travel purchased in the prior year. Along with the 1099-misc American will send you a check to pay the taxes on the travel.
Note: After pandering our employee travel to third parties in undisclosed agreements and eroding its value in bartering it to facilitate spin-offs and liquidations, they protect their own positive space elitist travel.

15. Club Memberships: This is one of my favorite categories. After employee concessions in 2003, we continued to pay for Mike Gunn's memberships to The Sports Club, LaCima Club and The Lake Las Vegas Southshore. In retirement, he was provided with a parking permit at McCarran Airport in Las Vegas.

That's right folks; we were robbed at Gunn-point to spring for Mike's parking in Sin City.

Patti Haddon
PUPOFF
**********************************************************************
*
SCHEDULE A

The persons identified herein constitute the Participants of the Plan as of the Effective Date of the Trust.

Timothy Ahern
Jane Allen
Gerard Arpey
Walter Aue
Thomas Bacon
James Beer
Peter Bowler
David Brooks
David Campbell
Jeffrey Campbell
John Carpenter
Donald Carty
Robert Cordes
Lauri Curtis
David Cush
Thomas Delvalle
Bernard Desena
Timothy Doke
Daniel Garton
L.T. Gleason
Isabella Goren
Beverly Goulet
William Greene
Gregory Hall
George Hazy
Robert Henderson
Douglas Herring
Henry Joyner
Gary Kennedy
Craig Kreeger
Robert Kudwa
John MacLean
Charles MarLett
Anne McNamara
Scott Nason
Susan Oliver
Robert Olson
Randall Phillips
William Quinn
Ralph Richardi
William Ris, Jr.
Carmine Romano
John Samuel
Peggy Sterling
Carolyn Wright

 

[eolesen]

Sorry to call you on a technicality, but about 25% of the names on that list have either left the company or retired.

SCHEDULE A

The persons identified herein constitute the Participants of the Plan as of the Effective Date of the Trust.

Timothy Ahern
Jane Allen Left the company
Gerard Arpey
Walter Aue
Thomas Bacon Left the company
James Beer Left the company
Peter Bowler
David Brooks
David Campbell
Jeffrey Campbell Left the company
John Carpenter Left the company
Donald Carty Left the company
Robert Cordes
Lauri Curtis
David Cush
Thomas Delvalle
Bernard Desena Left the company
Timothy Doke Left the company
Daniel Garton
L.T. Gleason
Isabella Goren
Beverly Goulet
William Greene
Gregory Hall Left the company
George Hazy
Robert Henderson
Douglas Herring
Henry Joyner
Gary Kennedy
Craig Kreeger
Robert Kudwa
John MacLean
Charles MarLett
Anne McNamara Left the company
Scott Nason
Susan Oliver Left the company
Robert Olson
Randall Phillips
William Quinn
Ralph Richardi
William Ris, Jr.
Carmine Romano
John Samuel Left the company
Peggy Sterling
Carolyn Wright

I'm sure there were others who left that I missed.

Also, in 2003, the paying of club membership fees, home office equipment and lease car allowances was discontinued.

Lastly, show me an example where travel was bartered to third parties... When Skychefs and Sabre were spun/sold, only those employees who had been entitled to travel prior to the sale/spin were entitled to travel after the fact.

If AA's MRO operations were spun off tomorrow, how would you feel if they were to cut off all your travel immediately, vs. honoring it for 10 years like they did with Sabre?

 

[limit]

Sorry to call you on a technicality, but about 25% of the names on that list have either left the company or retired.
I'm sure there were others who left that I missed.
....................

technicality?
I see no misrepresentation here at all.


"The page was taken from the AMR 10K filing from the year 2003. The list contained the names of all the participants in the Don Carty bankruptcy proof Trust. I read the names of the following participants aloud:

Gerard Arpey
Dan Garton
Gary Kennedy
Lauri Curtis
Ralph Richardi
Chuck MarLett
Will Ris
(The complete list as it appears in Schedule A of the 10K is posted below)."

 

[Hopeful]

Sorry to call you on a technicality, but about 25% of the names on that list have either left the company or retired.
I'm sure there were others who left that I missed.

Also, in 2003, the paying of club membership fees, home office equipment and lease car allowances was discontinued.

Lastly, show me an example where travel was bartered to third parties... When Skychefs and Sabre were spun/sold, only those employees who had been entitled to travel prior to the sale/spin were entitled to travel after the fact.

If AA's MRO operations were spun off tomorrow, how would you feel if they were to cut off all your travel immediately, vs. honoring it for 10 years like they did with Sabre?

First of all, it's not MY list, but there is no technicality...Greed is good....for executives. You probably still think Carty was a "good" guy for keeping the SERPS hush hush while he was pointing the bankruptcy gun at the workers' heads telling us concessions or else!

And before you defend Carty, had he not done anything immoral, he would not have resigned!


As for travel....Thanks to high load factors, I buy tickets for the family come vacation time...

 

[TWU informer]

Actually this thread appears to confirm FAILED Corporate Vision and Policy.

According to many, the bonus awards, and SERP were designed to keep "key" management employees from leaving.

Obviously, assuming that eolesen is accurate in his list of those that have left, the policy has failed.

Of course, even Mr. IMGONNAHIREACONSULTANT (Arpey) can be replaced and the Airline will survive. We have a few in Tulsa who believe the Airline will fail when they leave also. But fact is, anybody, including myself could hire outside consulting frims to run the airline, while I were to make millions in compensation. And nobody at this airline is beyond replacement.

 

[eolesen]

My point in commenting on the list was the statement that the management team was essentially the same today as it was in 2003. It isn't. 25% turnover is pretty high by a lot of standards for an executive team.

It wasn't clear to me that these were PUPOff's comments and not Hopeful's (try using the quote feature next time?).

TWU Informer is correct that bonus and retention plans usually don't work, but arguably a few people on that list needed to go, while others are people that would truly be a loss because they're not "yes" men.

I found another error in Patty's assumptions as well -- if you quit, the options evaportate regardless if you're a front line employee or an exec. Options survive retirement for front line employees as well.

 

[lpbrian]

Anybody know when Sabres' NRSA travel ends? I see they are still traveling NRSA. As for bartered travel, I think some EDS employees were given travel benefits, but that may no longer apply.

 

[eolesen]

I was one of the analysts responsible for travel policies/procedures in the mid to late 90's, and to the best of my knowledge, AA never bartered space available travel with any vendors who wasn't originally part of AMR.

Travel for Sabre employees who were on payroll prior to the spin-off (March 15, 2000??) ends on June 30, 2008.

When Sabre sold off FOS and their data center management to EDS in 2001, employees who were entitled to travel under the AA-Sabre split agreement kept those privileges when they were "sold" to EDS.

 

[limit]

When Sabre sold off FOS and their data center management to EDS in 2001, employees who were entitled to travel under the AA-Sabre split agreement kept those privileges when they were "sold" to EDS.

Do privileges for these employees ( now with EDS ) ever expire?
How do their travel charges compare with those for AA employees?
What is their boarding priority?

 

[eolesen]

Both Sabre and EDS's privileges expire next June. Rates are about the same as far as service charges go, but SG and ED have imputed income assessed. That involves adding the per-segment "trip value" as taxable income on their W2, which more or less doubles the actual cost to the employee. Boarding priority is the same.

Again, this wasn't a perk -- it was a phaseout of travel for employees who were hired as AA employees, and by no fault of their own, found themselves working for Sabre at the date of the spin. It's definitely more generous than what happened with folks hired by AMR Services when it was sold off and rebranded Worldwide Flight Services -- I think they only got 30 or 90 days and that was that.

 

[limit]

Both Sabre and EDS's privileges expire next June. Rates are about the same as far as service charges go, but SG and ED have imputed income assessed. That involves adding the per-segment "trip value" as taxable income on their W2, which more or less doubles the actual cost to the employee. Boarding priority is the same.

Again, this wasn't a perk -- it was a phaseout of travel for employees who were hired as AA employees, and by no fault of their own, found themselves working for Sabre at the date of the spin. It's definitely more generous than what happened with folks hired by AMR Services when it was sold off and rebranded Worldwide Flight Services -- I think they only got 30 or 90 days and that was that.

Thanks. I never saw this as a problem.

 

[Boomer]

From the following we find that poor, poor Ourpay was forced to live on a frozen allowance of $33,000.00 for cars, clubs and insurance while poor, poor Hoovill had his $894,014.00 hovel purchased by AMR: financed by taking food out of your families' mouths and feeding it to them.

Link Provided Lowdown on perks for some Executives

..."$33,000 - Personal allowance paid to AMR Chairman Gerard Arpey in lieu of car leases, club dues, planning fees, split life insurance and other perks. The amount was frozen in 2003."...

..."$894,014 - Cost to AMR to buy and sell (at a loss) chief financial officer Tom Horton's house in New Jersey and cover other relocation expenses."...

While the Pilots and Flight Attendants become ever more indignant over the "let them eat cake" attitude of AA Management, the TWU continues to provide Vichy Leadership.

Link Provided Arpey defends Executive Bonuses

..."I certainly understand the emotions expressed today," Arpey said after the meeting. But he said he hoped they could "agree to disagree" on the issue and focus on keeping the airline profitable.

This is an issue on which we may have a hard time finding common ground," he said. "That doesn't mean we can't or shouldn't keep working hard to find common ground on the other issues affecting our business, because there is no debating that all of our futures are linked to the success of American Airlines.

Arpey said that stock-based executive compensation has been good for investors and employees. "Among other things, it kept the management team focused on avoiding bankruptcy, when most of our major competitors didn't," he said. Had American entered Chapter 11, he added, employees "would have fared far worse than they have."...

..."We saved your bacon," said Dave Eitel, a San Francisco-based pilot."...

..."Patricia Haddon, a stockholder and former flight attendant, said, "We wouldn't trust any of you if you told us water was wet." She added that Arpey's nickname among many employees now is "Carpy," to associate him with former CEO Don Carty, vilified among workers for an executive perks scandal in 2003 that resulted in his resignation."...

"...Our members, your employees, feel betrayed," Bobby Gless, international coordinator for the Transport Workers Union, told Arpey."...,(Later adding),..."We’ll still be side by side doing what we need to do," Gless said...
Underlined-emphasis mine

Industry observers and columnists are beginning to awaken to the depth and breadth of the groundswell against the Divine Right of Kings attitude taken by CEO's, like Arpey, as opposed to the humanitarian concerns expressed by other CEO's such as DAL's.

Link Provided What is Gerald Arpey up to now?

..."It was almost painful to watch, if you're an Arpey fan -- as I am." Writes Author Mitchel Schnurman, who continues..."It was a disappointing, even baffling, performance, given the preparation time and the spotlight of the annual meeting."...

Link Provided Ron Allen Award to Gerald Arpey

Holly Hegeman, PlaneBusiness.com:
"It was here where Gerard made his serious, and perhaps, fatal mistake. It was at this point that Gerard's response, and that of his top executives, to employees' anger over news concerning executive bonuses doomed all that had been done previously.

Because it was at this point where Gerard, the financial guy, appeared to completely discount how fragile those "warm and fuzzy" intangible things like trust and credibility can be.

It was also at this point where Gerard apparently did not realize that when you preach the concept of "shared sacrifice" you'd better believe in it -- really believe in it -- or you risk losing the "shared trust" you have worked so hard to build with those same employees. And you'd better damn well make sure that those senior execs close to you believe in it as well.

But instead of supporting his employees -- all his employees -- and expressing empathy as to why they might feel upset at the thought of top execs getting large bonuses, after having given up so much themselves, Gerard became defensive. No bone thrown to the worker bees, not even a word of encouragement. No, it became us versus "them" -- with "them" being his own employees.

He became so defensive that he began to publicly defend why it was that his execs were entitled to the bonus payments. So defensive that he then made another mistake -- he encouraged the company's "spin" of the issue into a union/management fight."

Link ProvidedDelta Airlines CEO Grenstien

..."For 74-year-old Delta chief executive Gerald Grinstein, a veteran of airline and railroad front offices, Washington politics and university boards, nothing was quite like taking over Delta as it faced a financial tailspin"...
..."And although he has engineered $480 million in future pay and benefits so his 39,000 worldwide employees can be competitive, Grinstein will leave Delta financially empty-handed. All of his equity, incentive pay and severance will be used to set up two charitable trusts to help Delta families in times of hardship and to fund scholarships for Delta employees."...
..."The pay in this job has been absolutely lousy, but the rewards have been great. And the greatest reward was the ability to work with them and build -- rebuild the company together," Grinstein said."...
..."I guess my legacy would be; I would like it to be: 'you can trust him to do what he says'," Grinstein said."...

 

[Boomer]

Wow!, none of the CorporAAte sponsors rushed to the defense in over 24 hours...must be some kind of a record; or, perhaps AMR hasn't had time to issue the talking points.

 

[eolesen]

It's not something management is going to cave on, and nothing management does will ever come close to satisfying the unions, so what's the point?

Perhaps Crandall had it right -- playing nice with the unions just doesn't pay in the long run... It certainly didn't work at UAL or TWA, it hasn't worked at AMR, and it's starting to look like even SWA is in for some rough negotiations on the next go-around.

 

[The Goose]

Wow!, none of the CorporAAte sponsors rushed to the defense in over 24 hours...must be some kind of a record; or, perhaps AMR hasn't had time to issue the talking points.

That's not it at all - they simply don't give a damn what the employees think.

They got theirs.