US Airways passengers stranded in Charlotte

[SparrowHawk]

Pay the CEO and the entire management team ZERO and it might have forestalled the bankruptcy filing by one day, as we are talking about around .1% of the total labor costs. No airline executive is going to commit seppuku with a jet engine fan blade as bankruptcy allows a financial re-birth without actually having to die.

So Calculates Jester.

well Jester you calculate wrong!

There are approximately 35 Vice Presidents at US. For the sake of argument lets say the average yearly compensation is 1.5 million each or $52.5 Million Annually.

The entire Executive Compensation equals 76 cents an hour when divided across 33,000 Full Time Equivalents. Or put another way it would barely even cover the lowest paid FICA contribution. Truth is my number is high for total Executive Compensation. Now to make it interesting throw in the benefits. Just the Employers contribution to FICA alone for 33,000 is higher than Executive Compensation. Throw in another $3,000 per year for health insurance and see what that number is?

 

[Jester]

well Jester you calculate wrong!

There are approximately 35 Vice Presidents at US. For the sake of argument lets say the average yearly compensation is 1.5 million each or $52.5 Million Annually.

The entire Executive Compensation equals 76 cents an hour when divided across 33,000 Full Time Equivalents. Or put another way it would barely even cover the lowest paid FICA contribution. Truth is my number is high for total Executive Compensation. Now to make it interesting throw in the benefits. Just the Employers contribution to FICA alone for 33,000 is higher than Executive Compensation. Throw in another $3,000 per year for health insurance and see what that number is?

Let's assume your executive compensation figures are correct at $52,500,000, while for FY 2010 total wages and benefits were $2,244,000,000 (http://quote.morningstar.com/stock-filing/Annual-Report/2010/12/31/t.aspx?t=XNYS:LCC&ft=10-K&d=e84439cb1d5db3a558705602631fe0a6) (Page 42), therefore, the percentage of executive pay was 2.33% for the total wages. Frankly, that's not going to place me into a higher tax bracket or provide a meaningful change in my lifestyle, nor all that meaningful in terms of the cause as to the need to file for a bankruptcy organization.

Furthermore, I question your $52.5 total executive compensation figure in 2010, as the Top 5 US Airways executives (Parker, Kerr, Johnson, Kirby and Isom) were paid a combined total of $10.4 million with the lowest being Isom at $1.75 million, and I doubt the remaining VPs were anywhere close to Isom's salary.
(http://insiders.morningstar.com/trading/executive-compensation.action?t=LCC&region=USA&culture=en_US)
In all likelihood, the total executive compensation is much lower than your example, and probably represents less than 2% of total wages, and less than 1/2% of the total expenses of approximately $11 billion in total expense.

Again, complain about executive compensation, but that's hardly a huge component in more large companies' total cost structure or total wages, and rarely, the most important factor in terms of a company's need to file for bankruptcy re-organization.

So Corrects Jester.

 

[malikie]

In all likelihood, the total executive compensation is much lower than your example, and probably represents less than 2% of total wages, and less than 1/2% of the total expenses of approximately $11 billion in total expense.

You might want to re read sparrow's post before you present your false sense of superiority. Sparrow clearly states that his numbers were most likely high for the executive compinsation.

 

[SparrowHawk]

In all likelihood, the total executive compensation is much lower than your example, and probably represents less than 2% of total wages, and less than 1/2% of the total expenses of approximately $11 billion in total expense.

You might want to re read sparrow's post before you present your false sense of superiority. Sparrow clearly states that his numbers were most likely high for the executive compensation.

Thanks for noticing. I made it way higher than I believe it to be to make the point. If executive compensation were actually in the $35 Million dollar range then it makes the numbers even worse. This way no one could say I threw out a low ball number.

Interestingly this also points out the "Tax the Rich" fallacy as a way to raise enough revenue to eliminate our debt.

 

[767one]

Pay the CEO and the entire management team ZERO and it might have forestalled the bankruptcy filing by one day, as we are talking about around .1% of the total labor costs. No airline executive is going to commit seppuku with a jet engine fan blade as bankruptcy allows a financial re-birth without actually having to die.

So Calculates Jester.

While I agree with management pay going to zero not forestalling BK my point is that a true leader would not do anything to those that work for him that he would not accept for him/her self. Therein lies the problem with business and our country. Our business and political leaders put themselves above those they lead? and in the case of govt. those they also supposedly work for. Also the BK laws are misused daily by those who don't have the talent to truly lead. The BK laws take away any incentive for an executive to actually lead a company .


Regards,


Bob

 

[CallawayGolf]

I would say that the numbers used in these examples are not just way high, they are so far off that they don't even come close to reality. You can't take an officer's total compensation and claim that there is a 1:1 relationship to the impact on operating expenses. The substantial component of executive compensation comes from stock options, not salaries or bonuses which do not impact the P&L. Let's use Doug's 2010 salary and bonus since both are well-published figures:

Salary $ 550,000 (income statement impact $550,000)
Bonus (0-2 times salary) $ 987,800 (income statement impact $1,100,000)
Total wages $1,537,800

So if the impact of Doug's salary and bonus was $1.5m in 2010, then you can be absolutely certain that the President, EVPs, SVPs, and VPs made substantially less than that figure in wages and bonuses. I would guess the average non-stock incentive compensation for the executive group would be $350,000 at best. That would put the total impact of 35 executives on the P&L to around $12M or around 0.1% of revenues at $11B. The amount of executive compensation impact on total wages would be 0.5% based on $2.2B in total payroll.

Another way to look at it would be to divide executive wages and bonuses by the approximately 32,000 employees and this would yield about $375/year per employee. So, if all 35 executives salaries and bonuses were set a zero and those amounts were distributed to the rest of the employees, the average employee would get less than $300/year after taxes. In other words, executive compensation doesn't have a big impact on operating income or the amount available to pay non-executive salaries. I would have to go back and check, but I believe the DOT-based employee bonuses actually cost the company more each year than all of the executive compensation.

I left out executive stock grants and options for a reason. These are certainly a financial benefit to the executives when the stock values increase, but they have zero impact on the company's operating expenses on the P&L. The stock grants come from the stockholders as a way to ensure the executives goals are correctly aligned with maximizing stockholder value. This is common practice for publicly-traded companies as it is the only way to ensure that the stockholders' primary concerns (return on investment) is also on the mind and take home pay of the executive team.

 

[CallawayGolf]

While I agree with management pay going to zero not forestalling BK my point is that a true leader would not do anything to those that work for him that he would not accept for him/her self. Therein lies the problem with business and our country. Our business and political leaders put themselves above those they lead? and in the case of govt. those they also supposedly work for. Also the BK laws are misused daily by those who don't have the talent to truly lead. The BK laws take away any incentive for an executive to actually lead a company .


Regards,


Bob

Some of what you say is true, but there is actually a very strong incentive for executives to not to take their companies into bankruptcies. Executives are granted stocks and options which accounts for a substantial portion of their total compensation. An executive with a sizable number of stock grants/options would lose all of that potential value upon entering bankruptcy. Not only that, but now they have to add "leading a company into bankruptcy" to their resume. That might get you a position on a company's BOD somewhere, but your spotless career as an executive would now have quite the blemish on it and you would probably not be in high demand among other top companies. Sort of like a Superbowl-losing coach probably won't get a big contract offer from another team who also wants to see their team go to the Superbowl and lose. Bankruptcy is a last-ditch effort that shareholders and executives traditionally seek to avoid - some far more than others, I will admit.

 

[SparrowHawk]

@Callaway Golf,

I inflated the executive comp numbers deliberately in order to make the point of just how little impact they have on bottom line performance.

 

[john john]

Another way to look at it would be to divide executive wages and bonuses by the approximately 32,000 employees and this would yield about $375/year per employee. So, if all 35 executives salaries and bonuses were set a zero and those amounts were distributed to the rest of the employees, the average employee would get less than $300/year after taxes. In other words, executive compensation doesn't have a big impact on operating income or the amount available to pay non-executive salaries. I would have to go back and check, but I believe the DOT-based employee bonuses actually cost the company more each year than all of the executive compensation.

Sounds like the old pilot argument we could work for free and it won’t matter the airline would still loose money
Noting new here each group is special
Senior Executive, administration, lower middle management, flight attendance, dispatch, fleet service, passenger service, maintenance and relative, engineers

 

[Jester]

@Callaway Golf,

I inflated the executive comp numbers deliberately in order to make the point of just how little impact they have on bottom line performance.

Then I missed the point of your post using the hypothetical $52.5 million example, and received a rash of crap from malikie in the process, as I made the assumption by giving the benefit of a doubt as your intention was to skewer Executive compensation as a causality for corporate bankruptcy. I agree, if you want to go lower on the estimate, then it only further weakens the argument Executive compensation as being a major contributing factor to a typical corporate bankruptcy.

Generally speaking, there is no single labor classification which causes a large company to file for bankruptcy re-organization, as no one group has a majority the wages and benefits total, not to mention, the total expenses. My point of the discussion was directed at those who in a knee-jerk reaction scream, "Management is paid too much!" while ignoring they are only a tiny percentage of the total cost structure, and pretend that if executive pay was slashed to zero, then everything would be fine and all labor groups could continue at the same level of pay and benefits.

So Clarifies Jester.

 

[signals]

35 Vice Presidents? Can't you survive with 1? There's a 'who you know' job, if I ever heard of one

 

[700UW]

I guess you dont know history Jester in the first chapter 11 case the unionized employees gave $1.2 billion a year in concessions.

 

[Jester]

I guess you dont know history Jester in the first chapter 11 case the unionized employees gave $1.2 billion a year in concessions.

700UW,

As if I care about your opinion, as usually your interjections are neither relevant or pertinent to the discussion at hand, and your lastest post would be prima facia thereof again. The issue was not about what employees did or did not lose through bankruptcy, but rather the percentages of Executive pay to the total wages and to the total expenses as it relates to bankruptcy re-organizations-- but again, there you go adding another non-sequitur to the discussion.

You do not work for the company anymore, but yet you continue to opine and pontificate about topics and within work groups for which you have never been employed? Maybe you need another hobby?

So Chastises Jester.

 

[Dont call me Shirley]

35 Vice Presidents? Can't you survive with 1? There's a 'who you know' job, if I ever heard of one

Somehow, the country gets along with just one.


Can someone come up with a list of titles/divisions for these 35. OK, I can one for each major division in the company. But 35? How does this number compare with other major carriers? All of which are larger. I can see how DL, with 724 planes and 247 mainline (source: wiki) destinations on six continents might need quite a few.

 

[SparrowHawk]

Somehow, the country gets along with just one.


Can someone come up with a list of titles/divisions for these 35. OK, I can one for each major division in the company. But 35? How does this number compare with other major carriers? All of which are larger. I can see how DL, with 724 planes and 247 mainline (source: wiki) destinations on six continents might need quite a few.

Actually it's about right. Last time I looked WN had 33.

DL is less forthcoming on their web site.