Executives of major companies are taking a pay cut to show solidarity with the suffering of their employees, and in some cases with furloughed workers. Their pay should be cut because for most compensation has ostensibly been tied to the financial performance of their companies.
When that happens they usually announce big cuts in “base pay” or salary, not in bonus (which in some case will be guaranteed) and not in stock. And salary is usually one of the smallest components of their income.
While most of the top executives at American Airlines are taking cuts to base salary, Doug Parker hasn’t taken a base salary in 5 years. He’s paid in stock. And he’s not taking less stock. The airline, in an internal company communication, pointed out to employees that the value of Parker’s stock portfolio has fallen – as though they were supposed to feel badly for him.
- That portfolio likely remains greater than what most of them will ever earn.
- The value of American Airlines stock had been in precipitous decline under his leadership, even before the current crisis.
A new SEC filing has details on the most recent United Airlines corporate executive compensation. United’s CEO Oscar Munoz will take $0 in base salary until June 30. Incoming CEO Scott Kirby will do the same. But how much of a cut is that, really? (HT: Tomi Kilgore)
Here’s 2019 compensation for both Munoz and Kirby.
|Salary||Bonus||Vested RSUs||Based RSUs||Total|
|J. Scott Kirby||875,000||1,093,750||3,062,500||3,062,500||8,093,750|
Bonus payouts are targeted at 200% of base for Oscar Munoz and 125% of base for Kirby, dependent on hitting key metrics. Long-term incentive stock awards are 860% of base for Munoz and 700% for Kirby.
The numbers above don’t include “the special premium-priced stock option award” Kirby got when the airline announced he would become CEO.
Munoz and Kirby have so far committed to waive 31% of base salary for the year (112 calendar days).
Scott Kirby received $13 million and lifetime travel when he left American. His signing bonus at United was $5 million in stock. United’s share price is currently 35% lower than it was when he joined.
Executive compensation is unpopular during tough times for a company. Of course if United makes it through to the other side of COVID-19 Kirby may earn his pay more than ever before (although Munoz was point on the government bailout, so perhaps he’s the one with the greatest ROI on compensation).