Statement by Capt. Jay Pierce, Continental MEC chairman
January 6, 2010
On January 4, Continental reported that new CEO Jeffery Smisek won’t accept his full year salary of $750,000 until the Company makes a full year profit. We were told that the reason behind this is Mr. Smisek’s belief that employees need to focus on making money before expecting pay and benefit increases. We further learned that Mr. Smisek’s sacrifice was his way of demonstrating that the tone for any business is set at the top.
This step, although perhaps better than no step at all, falls far short of rectifying the problem of executive compensation at Continental and across corporate America, revealed most acutely in the banking industry collapse of last year. The real problem with executive compensation is not with base salaries. Rather, it is with compensation such as stock options and bonuses that result in total compensation packages that not only dwarf regular employees’ compensation, but if related to performance at all, relate only to short term rather than long term performance. For instance, since the pilots gave concessions in 2005, Mr. Smisek’s total compensation has totaled approximately $17M, according to ALPA’s Economic and Financial Analysis department.
As I noted last week, exorbitant compensation paid to company management bears no relation to long term Continental performance and promotes the buildup of generational wealth that harms Continental (and society) by encouraging CEOs to serve only for a few years before moving on to other green pastures. Worse, Mr. Smisek’s “sacrifice” of giving up such a small portion of overall compensation hardly touches the sacrifices of our fellow pilots and employees, many of whom have been forced to go without healthcare, have given up on retirement, face unemployment or are suffering real and tangible economic hardship.
Also, news reports indicate that “Smisek might not have to stick to his pledge for long. Analysts surveyed by Thomson Reuters expect the airline to close the books on 2009 by reporting a loss of more than $38M in last year's fourth quarter. But for 2010, they predict a profit of about $190M.” (Associated Press)
If Mr. Smisek truly wants his incentives to match the “coworkers” he seeks to lead, we suggest a far more reasonable and fair proposition. Let him keep his base salary, but until line pilots and the rest of Continental employees qualify for the same level of bonuses, stock options, ROBIC payments and other forms of compensation, he should permanently refuse them. Only then will I be convinced that he, like all of our pilots and the rest of our employees, is truly focused on Continental’s long term rather than short term performance. Only then can he demonstrate that he is our “coworker” in the truest sense of the word.