This article from NYTimes.com has been sent to you by psa188@xxxxxxxxx /-------------------- advertisement -----------------------\ Explore more of Starbucks at Starbucks.com. http://www.starbucks.com/default.asp?ci=1015 \----------------------------------------------------------/ Furious, American's Unions Talk of New Votes April 22, 2003 By EDWARD WONG Still fuming over the failure of American Airlines to inform them of its compensation plans for senior management, all three of the company's major unions said yesterday that they would vote again or were considering voting again on $1.62 billion in annual concessions that their members had approved last week. But Donald J. Carty, chief executive of the AMR Corporation, the parent of American, said that the airline had already begun to carry out some of those cost cuts and would continue to do so. He also apologized for not disclosing the compensation packages more quickly, nevertheless he defended them as justified. Just last Wednesday, the airline was pounding its chest over winning huge labor concessions that it said were needed to avoid filing for bankruptcy protection. Unions for the pilots and the ground workers approved measures last Tuesday to give the company $660 million and $620 million respectively in annual savings. The flight attendants' union said that day that its members had rejected $340 million in cuts by 51 percent. But it agreed to extend the voting by one day, and on Wednesday it announced that members had approved the deal by 52 percent. The next morning, workers became infuriated after reading newspaper reports that American's board had decided to give seven top executives cash bonuses in 2004 and 2005 equal to up to twice their base annual salary if they stayed with the company until January 2005. Workers also learned that American had started putting money into a trust fund set up to protect the pension benefits of 45 executives from creditors in the event of a bankruptcy-protection filing. These executive benefits were disclosed in a filing with the Securities and Exchange Commission made by AMR on Tuesday night, after voting had ended at two unions and almost ended at the third one. Mr. Carty said yesterday that a payment of $41 million, with $16 million of that going to federal taxes, had been put into the executive pension fund last October. On Friday, the day after the unions learned of the executive compensation plans, Mr. Carty said he would get rid of the so-called retention bonuses for the seven executives, though he added that the company would not withdraw its executive pension payment. That announcement was clearly an attempt to appease the workers, but it did little to douse the flames. John Ward, president of the Association of Professional Flight Attendants, said that night that his members would vote again on their share of the concessions. The Transport Workers Union said the same thing yesterday. "The only way to assure credibility is to allow a full revote with the full membership knowledge of all relevant company actions," James C. Little, director of the Air Transport Division of the T.W.U., said in a message to workers posted on the union's Web site. Sam Mayer, a member of the board of the Allied Pilots Association, said in a message to workers that the board of that union was discussing holding another membership vote on concessions if the other two unions went ahead and did so. "We are ruling nothing out at this time," he said. None of the unions gave further details on the timing of the new vote processes. It would be an understatement to say that all this comes as stunningly bad news for American. The airline has lost $5.2 billion over the last two years and is expected to announce another significant first-quarter loss tomorrow. Mr. Carty, though, only appeared half-contrite yesterday during an evening news conference. He said his mistake in not earlier disclosing the executive compensation packages was a "big one." But he also said those packages were perfectly justified, because the board wanted to keep executives from being lured away to work at other companies. "Throughout all this, I should say, the AMR board operated well within the standards of all corporate guidelines" to "address a very retention issue," he said. But many critics of executive pay do not accept such justifications for giving retention bonuses and setting up protected executive-pension trusts. First, retention bonuses are given to executives just for staying in a job and not for how they or the company actually perform, critics say. Such bonuses also assume the executives should be kept around, they say, and American's dismal financial performance, especially as the world's largest airline, suggests that perhaps the wrong people are running the company. Second, the critics say, executives' annual compensation packages are already so much higher than the pay of average workers that troubled companies should not take extra measures to protect those parts of executive pension benefits that are not already federally guaranteed. American's $41 million payment last October to the trust fund also indicated that executives were not willing to make the sacrifices they were demanding of their workers, they added. The other question critics are asking is: Why did American delay its annual filing with the S.E.C., which outlined the compensation, until Tuesday night? The most cynical workers say American was withholding the information so as not to jeopardize the votes. Whether one buys that argument, everyone, including Mr. Carty, agrees that the timing was disastrous. Mr. Carty said yesterday that the company had kept putting off the filing because it was in the middle of labor negotiations and circumstances were changing by the day. He said he believed that delaying the filing would give it a greater chance of getting what is known as an unqualified opinion from its auditor, Ernst & Young. That means the auditor had approved the filing with no reservations. "These guys paid their money and took their chances," said Brian Foley, an executive-pay consultant based in White Plains. "They have no one to blame but themselves." Several experts in labor law said yesterday that the unions had proper legal grounds to redo the votes. For one thing, none of the union presidents have actually signed off on the concessions, an action needed to make the contracts binding, said Charles B. Craver, a professor of labor law at George Washington University. Holding a broad membership vote is an arrangement that is relevant to the internal operations of a union, but not to the actual legal procedure required for sealing a contract, he said. The unions also have enough grounds to accuse management of bargaining in bad faith, Professor Craver said. David L. Gregory, a professor of labor law at St. John's University, said that the flight attendants' union could also redo their vote on the grounds that management was unduly interfering with the election process. That is because management put pressure on the vote's timing, then asked union leaders to extend the voting in hopes the concessions would be ratified, he said. He added that the constant warnings of bankruptcy from management could also count as undue interference. Yesterday, Mr. Carty reiterated those warnings of what would happen in a bankruptcy filing. "The consequence for our employees," he said, "is really pretty ugly." http://www.nytimes.com/2003/04/22/business/22AIR.html?ex=1052018714&ei=1&en=c592b8497bb2bb1b HOW TO ADVERTISE --------------------------------- For information on advertising in e-mail newsletters or other creative advertising opportunities with The New York Times on the Web, please contact onlinesales@xxxxxxxxxxx or visit our online media kit at http://www.nytimes.com/adinfo For general information about NYTimes.com, write to help@xxxxxxxxxxxx Copyright 2003 The New York Times Company