This post won’t be riveting material for many of my readers, but I have been curious for quite some time what American Airlines’ CEO Tom Horton was getting for an exit package as a result of the merger with US Airways.
I had been discussing exactly this matter with View From The Wing a few weeks ago. We were both certain that Tom Horton made out better if American edited bankruptcy and Tom either continued to lead the airline or effected a merger outside of bankruptcy.
And, when details emerged that Tom was discussing compensation packages for himself I was pretty certain we were close to a final deal with US Airways. When asked about the CEO job during the press conference earlier this week, Doug Parker said, ““This isn’t about me or Tom, it’s about doing what’s best for the combined company.” Uh, yeah.
News sources are now reporting that Tom Horton will receive approximately $20MM in compensation, about half of which is cash with the remainder being stock in the new entity. To put that number in perspective, Tom Horton was making just over $600,000 a year in 2011 when he took over the reins as CEO of American Airlines. He got a pay raise of ZERO for taking over the top job and navigating the company through bankruptcy. He also saw his shares of American essentially get turned into dust.
So, a $20MM compensation package really isn’t all that bad. Let’s assume he would have gotten a pay raise if he exited bankruptcy. If you give him a salary of $1MM he gets 10 years pay and also gets roughly the same amount in stock options. Those aren’t overly valuable today since he’s probably heavily restricted from selling. But, if Doug Parker does a good job they could be worth a substantial amount in the future.
He gets an office for two years but that’s not the coolest perk he gets. He also receives “lifetime flight and travel benefits.” Boy, would I love to be able to read that agreement. If Tom flies the way I would given that benefit, it sure would be worth a lot of cash.