767Lover From , joined Dec 1969, posts, RR: Posted (9 years 1 month 6 days 7 hours ago) and read 8058 times:
Another example of poor financial decision-making:
Millions richer, ex-CEO departs Delta payroll
By RUSSELL GRANTHAM
The Atlanta Journal-Constitution
Published on: 07/27/05
One of the highest-paid people at Delta Air Lines is finally leaving the payroll — eight years after he left the company.
Ronald Allen was forced out as chairman and chief executive in 1997 but has continued to draw $500,000 a year from Delta for consulting services, although neither the company nor Allen will say whether he has provided any.
That fee has made Allen one of the top-paid people at the airline during its financial crisis. Current Chairman and CEO Gerald Grinstein draws a $450,000 salary, and last year he cut it to $250,000.
Now Allen's deal apparently ends. His multimillion-dollar early retirement package called for the consulting fee to last seven years, with an automatic extension to eight. Sunday marks eight years since Allen left.
Delta won't say whether it ever sought, or Allen ever offered, to shrink or curtail the fee to help fight the grinding slump that has forced job and pay cuts throughout the airline.
"The agreement with Mr. Allen ... has been honored and in no way amended or altered," said Delta spokesman Anthony Black, declining further comment.
RONALD ALLEN'S 'GOLDEN PARACHUTE'
Elements of the 1997 severance package:
• $500,000-per-year consulting contract for up to eight years, paid quarterly in advance ($4 million total).
• $4,586,515 lump-sum cash for severance payment, health benefits and incentive awards that were to be paid for 1997.
• $765,600-per-year pension, starting in 1997.
• Vesting of 298,000 stock options and restricted stock. He netted $6.3 million in the 1997 fiscal year after acquiring 89,000 shares, with remaining stock options then valued at $13 million.
• $210,000 in legal fees to prepare his retirement agreement.
• $25,000 per year fee as "advisory director" on Delta's board.
• Flight privileges for life for Allen and his family.
• An office and a full-time secretary in Buckhead's 24-floor Monarch Tower for 10 years. First-year cost was $91,099.
• $408,766 initial cost to design, construct and furnish the office.
• Membership for 10 years in the Commerce Club of Atlanta.
• Membership for 10 years in the East Lake Golf Club, as long as Delta maintains a corporate membership.
What in the heck kind of security system does this guy have? My security system is only $250 a year. His must have the same anit-aircraft protectin that the U.S. Navy uses on their ships, the Pheonix system.
767Lover From , joined Dec 1969, posts, RR:
Reply 6, posted (9 years 1 month 6 days 2 hours ago) and read 7738 times:
No, of course this contract isn't enough to run an airline into the ground. However, it does indicate something about the board of directors' lack of responsible financial decisions and contract negotiation. If they are as freewheeling with other contracts as this one, no wonder the airline can't make money while AA --which is larger-- turned a profit last quarter.
FlyPNS1 From United States of America, joined Nov 1999, 6606 posts, RR: 24
Reply 7, posted (9 years 1 month 6 days 2 hours ago) and read 7730 times:
You are missing the point. The amount of money has no real impact on DL's finances, but it says a lot about DL's BOD. DL's BOD has created a culture where incompetent managers (Ron Allen and Leo Mullin) are rewarded for their stupidity.
Ron Allen was forced out because of his poor decision making skills and yet DL still rewarded him. The same is basically true for Leo Mullin.
I wouldn't have a problem with these rewards IF these CEO's had done something to deserve them.