PERSPECTIVE: High-flying audacity

Powerful economic forces may ultimately drive American Airlines to bankruptcy, but the role played by executive self-indulgence should not be easily dismissed.

American chairman Donald J. Carty may have resigned on Thursday, but the executive perks that made him such a lightning rod for the company's unions were awarded by the very board of trustees that showed him the door. The board knew the company was hemorrhaging and that it would need to cut labor costs to stay in business, yet it still granted million-dollar bonuses to Carty and five other top executives. The board made the decision to tuck $41-million into a special fund last October to insulate executive pension benefits from bankruptcy, knowing that rank-and-file employees wouldn't be afforded the same protection. David Boren, the former U.S. senator who told newspapers that "Mr. Carty has lost the credibility and trust necessary to effectively lead the company through challenging times," sits on the compensation committee that gave Carty his windfall.

Call this high-flying audacity, and note how little shame has accompanied it. Even as Carty departs, he defends the bonuses as "well within the standards of all corporate guidelines." As recently as Monday, he was warning American workers not to renege on the $1.8-billion in pay cuts they had agreed to take to keep the company solvent. "The consequence for our employees," he said, "is really pretty ugly."

The real ugliness is the executive greed and the feigned appearance of shared sacrifice. American ground workers and flight attendants and pilots had faced the prospect of bankruptcy head on, and had voted to accept pay cuts of between 16 and 23 percent. Those votes showed the workers were willing to put their company's survival ahead of the immediate financial needs of their own families. Yet Carty, who had professed solidarity by cutting his own base salary this year by a third, was getting ready to stuff a $1.6-million bonus in his back pocket.

The bonuses, strangely enough, were aimed at enticing Carty and his executives merely to stay on the job. As industry consultant Morten Beyer told the New York Times, "Where would they go? Who needs them? These guys should be glad to have a job."

The American Airlines excesses, unfortunately, are not isolated. Even as the airlines industry has dealt with staggering losses since Sept. 11, the executives have continued to fly first class. Continental gave its chief executive, Gordon Bethune, a $14.7-million pay package last year, which was a 172 percent increase in a year in which the company lost $451-million. Continental is planning to lay off 1,200 workers this spring. Delta paid $17.3-million in performance bonuses for executives last year, as the company reported a loss of $1.3-billion. Its chief executive, Leo Mullin, received $13-million last year, more than doubling his pay.

The bonuses and pay have caught the attention of U.S. Congress, which is being asked to help cushion some $4-billion in losses the industry attributes to the war-related economy. But the greater long-term damage to the airlines industry, and to corporate America, may be the extent to which these executive gifts further alienate labor and management. At American, the crass executive behavior threatens a union backlash that could send the company into bankruptcy. Yet Carty still doesn't seem to get it, and neither does Boren. They still don't understand that the best business model is one that turns on shared sacrifice and shared reward.

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