UAL, airline execs took $350 mil as pensions ended
UAL Corp., US Airways Group Inc. and eight other companies paid executives $350 million in the five years before the U.S. was forced to take over their under-funded employee pension plans, a government report said.
One airline company missed $979 million in required pension contributions while its top three executives took $55.5 million in compensation, and another paid four executives $120.4 million amid two bankruptcies, a Government Accountability Office report today found. Data including dates of the pension terminations, stock awards and pay levels show the unnamed companies were UAL, the parent of United Airlines, and US Airways.
Benefits to retirees were cut in some cases by as much as two-thirds, as executives got salary increases, stock awards, retention bonuses and other pay, the GAO said in a report that studied pension takeovers from 2002 through 2005. Representative George Miller of California is considering legislation that will freeze executive compensation if a company's rank-and-file pension plan becomes significantly under-funded.
"It is fundamentally wrong that executives were able to line their pockets with millions of dollars from bonuses, stock options and free joyrides on corporate jets, while watching their workers' retirement security slip into peril," Miller, a Democrat and chairman of the House Education and Labor Committee, said in an e-mail.
UAL Response
A UAL spokeswoman, Jean Medina, said the company agreed to compensate Chief Executive Officer Glenn Tilton as part of his employment agreement "for the substantial value he forfeited by leaving his previous employer, which has nothing to do with a United pension payment or plan." Tilton joined UAL in 2002.
UAL's board signed off on the employment agreement, which was later approved during restructuring by a bankruptcy court and the creditors committee, she said.
A US Airways spokesman, James Olson, declined to comment.
The GAO, the congressional watchdog agency, looked at the compensation for executives at 10 of the largest companies that turned their pensions over to the government in the past decade.
Steelmaker LTV Corp., towel manufacturer WestPoint Stevens Inc., camera company Polaroid Corp., Reliance Insurance Co. and Pillowtex Corp. are among the other companies singled out, according to research of the unnamed case studies in the report.
Executive Perks
Some executives also received income tax reimbursements, severance packages and supplemental executive-only retirement before dumping their pensions, according to the report.
Other executives were provided benefits including apartments, personal trips on company airplanes and helicopters, club memberships, legal-fee reimbursement and automobiles. At one insurance firm, the families and executives used the company's Boeing Co. 727 airplane and Sikorsky helicopter for personal trips to China, Spain, Greece and Hawaii.
There are no laws that link the under-funding of workers' pension plans to an executive benefit.
Miller is looking into financial shortfalls at the Pension Benefit Guaranty Corp., the government agency that provides pension protection for 44 million workers. The PBGC reported last week that it has a $22 billion deficit.