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United Airlines unions protest executive compensation, call for 'say to pay'

by Jason M. Breslow
June 03, 2008


A coalition of unionized United Airlines employees representing 89 percent of the airline’s workforce has called on parent UAL Corp. to grant shareholders a say on future decisions regarding executive compensation.

“When UAL executives continue to be rewarded for lack of performance, the system is clearly broken,” according to a statement issued Tuesday by the Union Coalition at United Airlines, which represents more than 48,900 employees in unions covering the airline’s pilots, flight attendants, machinists, engineers, and controllers.

The statement comes on the heels of a recent decision by the UAL board to approve a plan worth as much as $130 million in extra incentives for company executives, according to Sara Nelson, a spokeswoman for the Association of Flight Attendants-CWA.

The past several months have been especially challenging for UAL. On Tuesday, the airline also announced that its May traffic fell by 4.1 percent. The company has failed twice in recent months to merge its operations with another airline -- first with Continental Airlines Inc. and most recently with US Airways Group Inc.

During the first quarter, the company posted a loss of $537 million and announced it would be eliminating 1,100 jobs.

UAL shares have dropped 76 percent over the past 12 months. The stock closed at $8.53 Tuesday, up 65 cents from Monday’s close. 

“United Airlines management … has been rewarded for failure,” said Joseph Tiberi, a spokesman for the International Association of Machinists.

Shareholders will have a vote on the incentive plan at the company’s annual meeting June 12 in Woodland Hills, Calif. The union, however, wants the board to grant shareholders a permanent and “meaningful way to voice their opinion on executive performance and compensation,” which it currently does not possess. 

Specifically, the union wants the board to grant shareholders so-called “say on pay” powers. Such powers, which are commonplace in Europe, would provide shareholders at UAL the right to issue nonbinding statements regarding executive compensation. Similar proposals have been introduced at more than 90 U.S. corporations; Congress is also considering the concept.

Say on pay “makes the process more transparent,” Nelson said. “It gives the shareholders a say in the process.”

The recent struggles at United Airlines are hurting employees, Nelson added. Pay has been cut, she said, and pensions have been terminated. And as employees are “suffering,” she said, “… executives rake it in.”

Nelson also voiced a lack of confidence in UAL chief executive officer Glenn F. Tilton.

“He has to go for the airline to succeed,” she said.

Robin Urbanski, a spokeswoman for the airline, said executive compensation at United is both market-based and “on par with other comparably sized companies.”

“It is not in shareholders’ best interest to have a compensation plan that is tied to the performance of our stock,” she added.