Officers get stock worth $56 million

Authors: David Milstead And Chris Walsh
Source: Rocky Mountain News

February 4, 2006

United Airlines has given its top eight executives 1.6 million shares of stock worth more than $56 million at Friday's closing price.

The stock awards, made Wednesday but revealed after business hours Friday, are "restricted" shares that can only be sold gradually over four years.

The numbers don't include United stock options, expected to add millions more to the executives' wealth.

United, the largest carrier in Denver, emerged Wednesday from a three-year bankruptcy and began issuing 125 million new shares to executives and creditors in the company's Chapter 11 case.

The company gave CEO Glenn Tilton 545,000 shares, worth nearly $18.9 million at Friday's closing price of $34.60...

The company gave CEO Glenn Tilton 545,000 shares, worth nearly $18.9 million at Friday's closing price of $34.60, according to documents filed with the Securities and Exchange Commission. Three executive vice presidents got 218,000 shares apiece, giving each man $7.5 million in stock.

Nine of the company's directors each got 10,000 shares, worth $346,000 at Friday's prices.

The actual value of the shares, though, could change by the time executives and directors can cash them out.

"These shares vest over a four-year period, so the value today is still theoretical," said United spokeswoman Jean Medina.

The awards are part of a management incentive plan that has set aside 10 million shares - 8 percent of the company - for stock and option awards for 400 top managers.

The company has said it used a study by compensation consultants Towers Perrin to determine that its officers' total compensation was 66 percent below market levels in 2005.

United chose the number of shares it would give to management when the stock was assumed to be worth $15, based on a September valuation of the company. When the stock debuted on the Nasdaq on Thursday, however, it traded for more than twice that value.

Employees are also set to receive shares in exchange for their sacrifices. United cut $4 billion in costs through wage and benefit reductions and by terminating pension plans. But for some who watched the wrenching cuts, the awards are just too much.

"This is disgusting," said Bill Moons, a United mechanic in Denver and a spokesman for the Aircraft Mechanics Fraternal Association, which represents 7,000 of the carrier's workers. "The executives get a gold mine and we get the shaft. Tilton hasn't been able to prove he can run a company that's not bankrupt yet."

One industry observer said United's compensation plans seem to be in line with hefty awards that have now come to define Corporate America.

Still, he called them "very generous," especially considering the sacrifices employees made and the fact that the company still isn't making money.

"It is not clear what the results of this restructuring will be, so it seems the executives are almost putting themselves first," said Alan Sbarra, a California-based aviation consultant. "It looks like 400 people are being enriched at the expense of 40,000 others."

Executives can sell 20 percent of the stock in six months and the remaining 80 percent in equal chunks on the first, second, third and fourth anniversaries of the stock award.

Executives rewarded

United's top eight executives were given stock on Wednesday.

Shares Value* (millions)

• Glenn Tilton 545,000 $18.9
• Jake Brace 218,000 $7.5
• Peter McDonald 218,000 $7.5
• John Tague 218,000 $7.5
• Rosemary Moore 109,000 $3.8
• Sara Fields 109,000 $3.8
• Paul Lovejoy 109,000 $3.8
• Richard Poulton 109,000 $3.8
• Directors 90,000 $3.1

Total 1,725,000 $59.7* Based On $34.60 Closing Price Friday. Stock Can Only Be Sold Gradually Over Four Years.