Not even two cheers for this wealthy boss's gesture
Outlook Is American Airlines’ Doug Parker a chief executive we should be applauding?
Mr Parker has received lots of positive press for volunteering to take his entire salary package in AA shares, joining less than a handful of other American executives who do the same thing. Their number includes Facebook’s Mark Zuckerberg and Google’s Larry Page.
The idea is that he’s backing both the company, and himself, by taking the same risk as his shareholders. This is supposed to align his interests with their interests.
“I believe this is the right way for my compensation to be set – at risk, based entirely on the results achieved, and in the same currency that our shareholders receive,” Mr Parker declared portentously in a letter to his employees.
But that’s not quite the case, is it. For a start, just 54 per cent of his eye-popping package is performance-linked. So he could leave the company on autopilot and he’d still get a multimillion-dollar parcel of shares.
Moreover, the sort of risk he is taking is a long way from the sort of risk Mr John and Mrs Jane Doe of Main Street USA are taking in saving some of their hard-earned in American Airlines shares in the hopes that they will help to fund their retirements.
Mr Parker is already an extremely wealthy man, who has taken an awful lot of cash out of the company. Just last year he made $12.3m (£8.2m), of which 40 per cent was paid in greenbacks.
American could therefore hit sufficient turbulence to land it in Chapter 11 bankruptcy and he would still retire an extremely wealthy man.
That’s not likely to happen, though, because he has chosen to take this the step at a time when American’s prospects appear to be bright. You would expect him to have a better handle on this than anyone else, too.
I’m not saying that Mr Parker hasn’t done a good job. By common consent, he has. Neither am I saying he shouldn’t be rewarded for his contribution to that success. But it’s not really even worthy of two cheers. Mr Parker is still a world away from Dan Price, a fellow CEO, who gave up most of his $1m salary to ensure that staff would enjoy a minimum wage of $70,000 within three years, and is a genuine risk taker who started his company as a genuine entrepreneur. I know whose letter to employees I’d rather be reading.
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