It occurred to me as I was reading United Airlines’ latest FORM 8-K/A filing that if the airline ever asks for a federal bailout (assuming the rescue plan ever gets passed) it might run into some accounting problems. It also underscored that even in the worst of times — the airline lost $2.7 billion last quarter — executive compensations almost never take a hit.
Kathryn A. Mikells will become United’s senior vice president and chief financial officer next month. In forms filed with the Securities and Exchange Commission, United has disclosed that Mikells will receive an annual salary of $525,000 and an annual incentive award opportunity of 60 percent of annual salary. She could end up pocketing closer to $1 million next year.
That’s a pretty generous compensation package, particularly with the economy in freefall and her airline hemorrhaging money. Now, I don’t have a problem with a company paying whatever it wants to an executive. After all, it’s a free market.
Or is it? Well, if you look at the details of the bailout agreement — which is likely to get passed today or tomorrow — you’ll notice provisions that cut the executive pay tax deduction from $1 million to $500,000 and limiting performance-based pay and stock options.
And the way I read it, the government is essentially saying that Mikells’ salary is over the limit.
Now, let’s be clear about one thing. United isn’t a bank — it isn’t asking for a bailout. At least it isn’t asking for one yet.
But I wonder: Why, at a time like this, would any airline lavish an executive with this kind of money?
My point? Travel companies in general, and airlines in particular, should be cautious about overly generous executive compensations at a time like this. It would be easy to give the wrong impression to passengers who are being asked to pay more for less — and employees who are being asked to make more sacrifices for the company.
