=20 ---------------------------------------------------------------------- This article was sent to you by someone who found it on SF Gate. The original article can be found on SFGate.com here: http://www.sfgate.com/cgi-bin/article.cgi?file=3D/chronicle/archive/2002/12= /06/BU195687.DTL ---------------------------------------------------------------------- Friday, December 6, 2002 (SF Chronicle) No sacrifice in store for CEO of United David Lazarus The government's decision to deny United Airlines a $1.8 billion loan guarantee all but ensures that the carrier is headed for bankruptcy court. It could also make the company's boss about $2 million richer. United announced earlier this week that Glenn Tilton, who took over as chief executive officer in September, and other senior managers would be willing to take average 11 percent pay cuts and forgo annual bonuses to share the pain with employees. However, those sacrifices were contingent on the loan guarantee. A feder= al board said late Wednesday that this isn't going to happen, so United's managers are once again free to rake in as much as they can. And in Tilton's case, that's a hefty sum. United may be losing as much as $7 million per day, and it may have sack= ed more than 20,000 workers in the past year, but that didn't stop the company from awarding Tilton a $950,000 annual salary. (Even with an 11 percent wage reduction, it's worth noting, he'd still be pocketing $845,500.) By contrast, the average airline mechanic's starting wage is $24,000 per year, according to the aviation-industry Web site AVjobs.com. A 7 percent pay cut United mechanics were expected to approve Thursday -- the vote was called off Wednesday night -- would have lowered a $24,000 paycheck to just $21,360. United is also extending generous incentive bonuses to its new CEO. According to the company's regulatory filings, Tilton stands to make as much as $1.9 million in extra cash if he can hit certain performance benchmarks. On top of that, he received a $3 million signing bonus just for agreeing to take the airline's top spot at this challenging moment in the company's history, even though he has no prior experience in the airline business. Tilton's an oilman. He previously headed Texaco and after Texaco's merger with San Francisco's Chevron, was named vice chairman of the combined entity. He also served as acting chairman of Texas energy giant Dynegy, in which Chevron is the largest shareholder. Tilton, 54, certainly won't have to worry about his golden years. United is coughing up $4.5 million for a trust to replace the retirement plan he gave up at Chevron. Oh, and he received 100,000 shares in United's parent, UAL Corp., along with options to purchase 1.15 million more for $3.03 per share. (Those options won't be useful for a while. UAL's stock plunged 68 percent Thursday to close at $1.) A United spokesman declined to comment on Tilton's pay package. In any case, it's not my intention here to slight Tilton's qualifications or in any way minimize the difficulty of the task he faces. I wouldn't trade places for a minute. But you still have to wonder: How could United lavish such a generous compensation package on a guy when tens of thousands of company employees are either losing their jobs or being asked to take substantial pay cuts? Ben Delancy, a specialist in executive compensation at the law firm Thel= en Reid & Priest, said United is paying Tilton a bundle for one simple reason: supply and demand. "There are relatively few people who have the experience to take a compa= ny like United and lead it back to success," he said. "Such people command a premium." That $3 million signing bonus, Delancy added, was probably intended as a hedge against United going bankrupt, which would put the kibosh on any deferred compensation coming Tilton's way down the road. This raises an interesting point: If Tilton had the presence of mind to ensure that his millions came up front, rather than be derailed later by a bankruptcy filing, how seriously did he take the airline's chances of avoiding Chapter 11? "Our highest priorities must be to restore employee trust and revive investor and customer confidence," Tilton said when he took over in September. It can now be fairly said that he failed spectacularly at both goals. Some observers questioned not just why Tilton took so long in offering to cut his own pay, but why he felt it necessary to negotiate such a weighty compensation package in the first place. "A real model of leadership would have said he'd go without pay," said Scott Klinger of United for a Fair Economy, a Boston nonprofit that focuses on the economic imbalance between corporate chieftains and ordinary workers. Indeed, United's last CEO, Jack Creighton, accepted no pay whatsoever wh= en he temporarily took the top spot in October 2001. This gave him considerable moral authority when he subsequently sat down with the airline's unions to negotiate pay cuts. According to United's 2002 proxy statement, Creighton's predecessor, Jam= es Goodwin, earned $900,000 in salary last year and received a bonus of $742,192. His severance package was worth three times this combined amount. Not bad for a guy who warned just days before stepping down that United would "perish" if it couldn't get its financial house in order. At least Tilton won't have trouble keeping warm this holiday season. ChevronTexaco's most recent proxy says he received about $3.6 million in salary and bonuses last year, and remains available to the company as a consultant for no less than $7,300 per day. Tilton also received $30,000 last year as a director of Dynegy, plus $1,500 per board meeting and $1,000 for each committee meeting attended, according to that company's proxy. United is flying into uncharted territory. But whatever happens to the airline, you kind of get the feeling that its boss is a guy who'll always land on his feet.=20 ---------------------------------------------------------------------- Copyright 2002 SF Chronicle