Interesting People mailing list archives
more on When You Fly in First Class ON UAL , It's Easy to Forget the D
From: "David Farber" <dave () farber net>
Date: Mon, 30 Jan 2006 11:17:21 -0500
-----Original Message----- From: Joe Pistritto [mailto:jcp () jcphome com] Sent: Monday, January 30, 2006 10:58 AM To: dave () farber net Cc: brett () lariat org Subject: RE: [IP] more on When You Fly in First Class ON UAL , It's Easy to Forget the D What he's "risking" is time value of money. A CEO can make 10+ million/year (or more in total compensation?) at a typical large public company. (I don't know what the actual number is, but I'd guess that would be around the truth). Tilton was a Vice Chairman of ChevronTexaco and had a 32 year history with the company, before he joined United, so he probably could've gotten a CEO slot at a Fortune 500 pretty easily with that pedigree. What's a typical Fortune 500 CEO slot "worth" in terms of total compensation? That time is money. If he goes to UAL, it crashes into bankruptcy and then is liquidated, he gets: - whatever salary he was being paid at the time (his salary was about $800K plus a bonus of $300K in 2004). - any severance he might get in the bankruptcy (which might not be a lot, most liquidations don't provide very much in the way of severance if at all). By definition any stock options are worthless. - whatever hit to his reputation he takes for failing to be able to organize a restart of the company. I'm not saying that United's reorganization plan is fair, mind you, but there is a real risk of millions of dollars that it's CEO took by joining the company in 2002 when it was clear it was going to be in bankruptcy for a long time and might well *not* be able to reorganize. He effectively took a much lower salary than he could "get" in the market because of the lack of viable stock options in the deal, on the hope of a future payoff if a reorg could be achieved. To not recognize that would also be unfair. The real question here is a larger one: when you have a substantially employee owned business (and many large companies have very significant fractions of their ownership in employee hands, either directly or through a pension/401K plan), should a "valid" reorganization plan recognize those owners differently than other stockholders. (Stockholders all lose their entire stock value in most reorg plans. Since generally all stock is of a single class, treating any particular set of stockholders *differently* *by virtue of their stock ownership* is legally problematic today.) I don't know the answer to that (or how that could be done legally), but it seems like there should be some way to accommodate employees who have invested significantly in a business (beyond just working there), in reorganization plans. There'd have to be legislation to do this though, and it'd have to be pretty carefully written to avoid killing the stock price of existing businesses that have employee-owners when passed or seriously compromising bankruptcy law. (effectively it'd be an "obligation" that transcends a bankruptcy). While you're at it, fix this problem for Pension Plans of a reorganized company too... Maybe a good discussion is what does that look like? -jcp- -----Original Message----- From: David Farber [mailto:dave () farber net] Sent: Monday, January 30, 2006 7:39 AM To: ip () v2 listbox com Subject: [IP] more on When You Fly in First Class ON UAL , It's Easy to Forget the D -----Original Message----- From: Brett Glass [mailto:brett () lariat org] Sent: Sunday, January 29, 2006 10:12 PM To: dave () farber net; ip () v2 listbox com Cc: edyson () edventure com Subject: Re: [IP] more on When You Fly in First Class ON UAL , It's Easy to Forget the D At 04:08 PM 1/29/2006, Esther Dyson wrote:
That the airlines are badly run is not in question. That top management makes a lot, also not in question. But Tilton is a relatively recent arrival.... Why should he have taken the risk in the first place?
This must be some definition of "risk" that I have not previously encountered. What was he really risking? He stood to make (and did make) many times more money than any of the "dots" (or most of us) made in an entire lifetime -- whether or not the company pulled out of bankruptcy. Some risk. --Brett Glass ------------------------------------- You are subscribed as jcp () jcphome com To manage your subscription, go to http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/ ------------------------------------- You are subscribed as lists-ip () insecure org To manage your subscription, go to http://v2.listbox.com/member/?listname=ip Archives at: http://www.interesting-people.org/archives/interesting-people/
Current thread:
- more on When You Fly in First Class ON UAL , It's Easy to Forget the D David Farber (Jan 30)
- <Possible follow-ups>
- more on When You Fly in First Class ON UAL , It's Easy to Forget the D David Farber (Jan 30)
- more on When You Fly in First Class ON UAL , It's Easy to Forget the D David Farber (Jan 30)