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Arpey Did Not Ask For "Golden Parachute".  
User currently offlinenyc2theworld From United States of America, joined Mar 2007, 666 posts, RR: 0
Posted (2 years 11 months 3 days 15 hours ago) and read 9121 times:

So it looks like Mr. Aprey was the force behind preventing Bankruptcy and when it couldn't be avoided left as he saw it as a failing. In addition, he didn't take any exit compenstation.

http://www.nytimes.com/2011/12/01/op...-ceos-moral-stand.html?_r=2&src=tp


Always wonderers if this "last and final boarding call" is in fact THE last and final boarding call.
37 replies: All unread, showing first 25:
 
User currently offlinedavescj From United States of America, joined Jun 2007, 2307 posts, RR: 0
Reply 1, posted (2 years 11 months 3 days 15 hours ago) and read 9094 times:

I don't say this often, but I think corporate America lost a good role model in Mr. Aprey. I'm not saying he was perfect, but I think his behavior in this case was exemplary.

Dave



Can I have a mojito on this flight?
User currently offlineMir From United States of America, joined Jan 2004, 21730 posts, RR: 55
Reply 2, posted (2 years 11 months 3 days 15 hours ago) and read 9082 times:

I'm no Arpey fan, but good for him. This should be the standard for bankruptcies - the company goes in, the senior management team goes out.

-Mir



7 billion, one nation, imagination...it's a beautiful day
User currently offlinerdh3e From United States of America, joined Mar 2011, 1765 posts, RR: 3
Reply 3, posted (2 years 11 months 3 days 15 hours ago) and read 9034 times:

One article I read said the board asked him to stay, and he refused.

User currently offlinecatiii From United States of America, joined Mar 2008, 3045 posts, RR: 4
Reply 4, posted (2 years 11 months 3 days 15 hours ago) and read 8935 times:

Classy move. After the vilification and vitriol by others in some of the threads related to Arpey, compensation, and potential exit packages, I'm interested to see how this thread goes.

User currently offlinegigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 5, posted (2 years 11 months 3 days 15 hours ago) and read 8898 times:

I'm happy to say : good for him and all of AA's management.

Most of their bonus dollars came in the form of stock payments. Almost all of which are now, effectively, worth zero.

I think paying executive bonuses in stock - rather than cash - is an amazing way to pay for performance. You do a great job, you get a great check.

NS


User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1604 posts, RR: 2
Reply 6, posted (2 years 11 months 3 days 14 hours ago) and read 8755 times:

Quoting Mir (Reply 2):
I'm no Arpey fan, but good for him. This should be the standard for bankruptcies - the company goes in, the senior management team goes out.

While I agree with the sentiment, you still need senior management to guide the company through bankruptcy. You don't have the resources to hire new leadership (costly to lure good executives to a company with an unsecure future) and you don't have the time they would need to get up to speed - it would greatly hinder the chances that the company comes out of bankruptcy. But I do think that great consideration should be given to cleaning house just before or as soon the company emerges from bankruptcy. (the problem is and always will be that the BoD who hire and fire senior management have a buddy-buddy relationship)


User currently offlinerdh3e From United States of America, joined Mar 2011, 1765 posts, RR: 3
Reply 7, posted (2 years 11 months 3 days 14 hours ago) and read 8751 times:

Quoting gigneil (Reply 5):
I think paying executive bonuses in stock - rather than cash - is an amazing way to pay for performance. You do a great job, you get a great check.

But they should come with strict time limits, aka long time horizons over which the options can be exercised in order to ensure they don't "pump and dump" their stock.


User currently offlineMir From United States of America, joined Jan 2004, 21730 posts, RR: 55
Reply 8, posted (2 years 11 months 3 days 14 hours ago) and read 8709 times:

Quoting LAXtoATL (Reply 6):
While I agree with the sentiment, you still need senior management to guide the company through bankruptcy.

Except that they got the company into bankruptcy in the first place. That's not a ringing endorsement of their ability to properly manage that particular company (not necessarily a black mark against their ability in general).

Quoting LAXtoATL (Reply 6):
You don't have the resources to hire new leadership (costly to lure good executives to a company with an unsecure future) and you don't have the time they would need to get up to speed

Then promoting from within, as AA is doing, might be a good option.

-Mir



7 billion, one nation, imagination...it's a beautiful day
User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1604 posts, RR: 2
Reply 9, posted (2 years 11 months 3 days 14 hours ago) and read 8586 times:

Quoting Mir (Reply 8):
Except that they got the company into bankruptcy in the first place. That's not a ringing endorsement of their ability to properly manage that particular company (not necessarily a black mark against their ability in general).

I agree, but they know the company the best and as long as they didn't lead the company to bankruptcy by fraud they are probably the best suited to guide them through bankruptcy as you don't really have the resources or the time to replace them.

Quoting Mir (Reply 8):
Then promoting from within, as AA is doing, might be a good option.

Its usually the only option, because they have the requisite knowledge. However, as you pointed out promoting from within is still rewarding the same senior leadership that got them in the mess in the first place. (caveat: you can have members of the leadership that didn't agree with the current path but were over ruled in the boardroom, but if they are good leaders they usually take that opportunity to leave instead of following a path they don't believe in). So, like I said in principal I agree with you that if the company goes into bankruptcy then the senior management team should go out but unfortunately it just isn't practical (in most cases).


User currently offlineikramerica From United States of America, joined May 2005, 21544 posts, RR: 59
Reply 10, posted (2 years 11 months 3 days 14 hours ago) and read 8554 times:

Quoting rdh3e (Reply 3):
One article I read said the board asked him to stay, and he refused.

I would have done the same. Being CEO of AA is a thankless job, and being vilified even more during BK can be dangerous for your family when the union thugs (minority but vocal force in any union) start their harassment campaign.



Of all the things to worry about... the Wookie has no pants.
User currently offlineLDVAviation From United States of America, joined Dec 2008, 1095 posts, RR: 5
Reply 11, posted (2 years 11 months 3 days 13 hours ago) and read 8385 times:

What does the "OurPay" crowd have to say now? I see they have nothing to say (yet)...

User currently offlinegigneil From United States of America, joined Nov 2002, 16347 posts, RR: 85
Reply 12, posted (2 years 11 months 3 days 13 hours ago) and read 8336 times:

Quoting rdh3e (Reply 7):
But they should come with strict time limits, aka long time horizons over which the options can be exercised in order to ensure they don't "pump and dump" their stock.

Apple, for example, is giving Tim Cook a million shares for Christmas - that vest only twice over TEN years.

He's worth EVERY penny. But he also needs to stay around, and they realize that.

NS


User currently offlineLAXtoATL From United States of America, joined Oct 2009, 1604 posts, RR: 2
Reply 13, posted (2 years 11 months 3 days 13 hours ago) and read 8231 times:

Quoting gigneil (Reply 12):
Apple, for example, is giving Tim Cook a million shares for Christmas

shares or options? If its shares that is almost $400,000,000! WOW!!! That's a nice christmas present!


User currently offlinecatiii From United States of America, joined Mar 2008, 3045 posts, RR: 4
Reply 14, posted (2 years 11 months 3 days 12 hours ago) and read 8197 times:

Quoting Mir (Reply 8):
Except that they got the company into bankruptcy in the first place. That's not a ringing endorsement of their ability to properly manage that particular company (not necessarily a black mark against their ability in general).

I see your point, but I think that oversimplifies it a bit. In the same way it wasn't just the union's recalcitrance on labor and pensions that led to the AA bankruptcy, it wasn't only the senior leadership team's management of the company that led to bankruptcy. And when you read the the paragraphs below, it demonstrates even more that there were external factors in play (such as trying to maintain your obligations to your employees when your competitors were not maintaining their obligations and therefore were at an advantage).

So it begs the question: what would have constituted proper management of AA? I think many would have said "taking the company into Chapter 11 early on to properly align your costs and debt with those of your competitors who had already done so," but that overlooks the moral obligations cited in the NYT article.

From the NYT:

For a long time, Mr. Arpey voiced his opposition to bankruptcy, but the airline struggled because of it. “Our bankrupt colleagues all made net profits, good net profits last year, and we didn’t,” Mr. Arpey told me a few months ago. “And you can mathematically pinpoint that to termination of pensions, termination of retiree medical benefits, changes of work rules, changes in the labor contracts. That puts a lot of pressure on our company, not to be ignored.”

Over the last eight years, I have interviewed hundreds of senior executives for a major academic study on leadership, including six airline C.E.O.’s. Mr. Arpey stood out among the 550 people I talked with not because he believed that business had a moral dimension, but because of his firm conviction that the C.E.O. must carefully attend to those considerations, even if doing so blunts financial success or negates organizational expediency. For him, it is an obligation that goes with the corner office.

When we discussed the prospect of bankruptcy at American he spoke with an almost defiant tone of the company’s commitment to its employees and holders of its stock and debt. “I believe it’s important to the character of the company and its ultimate long-term success to do your very best to honor those commitments,” he said. “It is not good thinking — either at the corporate level or at the personal level — to believe you can simply walk away from your circumstances.”


User currently offlinecmf From , joined Dec 1969, posts, RR:
Reply 15, posted (2 years 11 months 3 days 12 hours ago) and read 8009 times:

Quoting rdh3e (Reply 7):
But they should come with strict time limits, aka long time horizons over which the options can be exercised in order to ensure they don't "pump and dump" their stock.

I do not know the terms at AA but every stock option plan I have been part of vested 25% after one year and another 25% and 25% each year after that. I had a maximum of 10 years to exercise. I think those are representative.

The last one I got had a very nice exception. If the company was sold all options vested at that time.

Quoting catiii (Reply 14):
So it begs the question: what would have constituted proper management of AA? I think many would have said "taking the company into Chapter 11 early on to properly align your costs and debt with those of your competitors who had already done so," but that overlooks the moral obligations cited in the NYT article.

There is no doubt C11 for the competition changed the environment they operated in dramatically with AA getting the short stick. Definitely an unwanted effect of C11.


User currently offlineikramerica From United States of America, joined May 2005, 21544 posts, RR: 59
Reply 16, posted (2 years 11 months 3 days 12 hours ago) and read 7984 times:

Quoting catiii (Reply 14):
So it begs the question: what would have constituted proper management of AA? I think many would have said "taking the company into Chapter 11 early on to properly align your costs and debt with those of your competitors who had already done so," but that overlooks the moral obligations cited in the NYT article.

This is why I have no sympathy for the unions at AA, especially the pilots.

They hand picked Arpey to be the CEO in 2003. AA should have just entered BK then, and who knows how much better off they would be. But instead they allowed the unions to oust the leadership in exchange for some concessions, and Arpey was installed as CEO.

For years he has tried to keep AA out of BK, to avoid the labor "decimation" that it would allow, and as the years progressed, he was vilified more and more anyway. You'd think that "your guy" in the head office, who is fighting to get you as much as possible while avoiding BK, could be cut some slack, and offered ample compensation to get him to stay there.

Instead, he became the new evil management, his pay was questioned, the APA thwarted his attempts to move the airline forward, etc.

Ultimately, it meant BK 8 years later, with AA in a far weaker position than 2003, and Arpey saying "smell ya later" and bailing on this mess.



Of all the things to worry about... the Wookie has no pants.
User currently offlinewn700driver From , joined Dec 1969, posts, RR:
Reply 17, posted (2 years 11 months 3 days 10 hours ago) and read 7673 times:

Quoting ikramerica (Reply 16):

They hand picked Arpey to be the CEO in 2003. AA should have just entered BK then, and who knows how much better off they would be. But instead they allowed the unions to oust the leadership in exchange for some concessions, and Arpey was installed as CEO.

I've echoed those sentiments many times here myself. Always amazed that they can have their guy running things, and still you see evidence of the FURP campaign all over DFW. Hope APFA, & APA, & the rest are happy with themselves now.... Just amazing how never satisfied those clowns are. Looks like a bunch of them will get to sell their valuable "experience" to some of the more truly private sector vendors (assuming they can get hired), and then have a look at work rules worth complaining about...

Good luck to the rest of AA. Maybe they'll have a shot at greatness now.


User currently offlineMir From United States of America, joined Jan 2004, 21730 posts, RR: 55
Reply 18, posted (2 years 11 months 3 days 9 hours ago) and read 7477 times:

Quoting catiii (Reply 14):
In the same way it wasn't just the union's recalcitrance on labor and pensions that led to the AA bankruptcy, it wasn't only the senior leadership team's management of the company that led to bankruptcy.

I agree. But it's not like management is blameless. And it's not the like union is going to come out of this without taking some serious hits, so it's not inappropriate for management to take some hits as well.

For whatever reason, Arpey's leadership didn't work at AA. That doesn't mean he can't run a company. It's entirely possible that he could go somewhere else, even to another airline, and do better, and more power to him if he does. But when a company goes bankrupt, it's time for house cleaning, since the status quo clearly isn't working.

Quoting catiii (Reply 14):
And when you read the the paragraphs below, it demonstrates even more that there were external factors in play (such as trying to maintain your obligations to your employees when your competitors were not maintaining their obligations and therefore were at an advantage).

And that's the problem with bankruptcy laws - they allow a company that doesn't have the moral fortitude to try and adhere to its obligations to force everyone else to adopt the same position. As I said in another thread, on the one hand you have the issue of consistency between how AA is treated and how its competitors were treated, but on the other hand you have the issue that at some point, the cycle of bankruptcies needs to be stopped, otherwise it will turn into a legally enabled race to the bottom.

-Mir



7 billion, one nation, imagination...it's a beautiful day
User currently offlineLufthansa From Christmas Island, joined May 1999, 3217 posts, RR: 10
Reply 19, posted (2 years 11 months 3 days 8 hours ago) and read 6894 times:

Quoting Mir (Reply 18):
And that's the problem with bankruptcy laws - they allow a company that doesn't have the moral fortitude to try and adhere to its obligations to force everyone else to adopt the same position. As I said in another thread, on the one hand you have the issue of consistency between how AA is treated and how its competitors were treated, but on the other hand you have the issue that at some point, the cycle of bankruptcies needs to be stopped, otherwise it will turn into a legally enabled race to the bottom.

which is exactly why other countries don't allow that kind of legislation. When you are a creditor, you absorb risk, as part of doing business. That should mean you risk losing what you have extended. This bankruptcy reorganization process has 2 goals. The first is to attempt to preserve jobs, the 2nd is to attempt to get the creditors more of their owed money back than they would get via liquidation. Seems humble enough in itself. But it completely ignores the distortion affect it has on markets. It would force everybody to behave differently if the consequences were liquidation. Unions would need to be more reasonable. Competitors would not be wounded by companies that should have been removed from the market place. (read running losses to compete with outfits that should have been removed from the marketplace) Companies would not price at levels merely to gain market share, because this could be fatal. Think about it. If years ago, CO etc were liquidated, there is a chance today American would be much healthier and stronger. There wouldn't have been mergers to create 3 big companies, those companies that did things right would have naturally stayed and grown.


User currently offlinedirtyfrankd From United States of America, joined Apr 2011, 191 posts, RR: 0
Reply 20, posted (2 years 11 months 3 days 8 hours ago) and read 6819 times:

I've always been a fan of Arpey, and am sorry to see him go. That being said, I think he was dead wrong on being that against Bankruptcy...it had to be done. Good for him on leaving in such a respectable manner. It's refreshing to hear this when these days, the best job out there is failing CEO. Fail, get a huge golden parachute, and get the hell out.

User currently offlineavek00 From United States of America, joined Oct 2004, 4406 posts, RR: 19
Reply 21, posted (2 years 11 months 3 days 8 hours ago) and read 6733 times:

Quoting Lufthansa (Reply 19):
It would force everybody to behave differently if the consequences were liquidation. Unions would need to be more reasonable. Competitors would not be wounded by companies that should have been removed from the market place. (read running losses to compete with outfits that should have been removed from the marketplace) Companies would not price at levels merely to gain market share, because this could be fatal.

And yet in most other major national air markets the absence of Chapter 11 has not consistently led to any of these outcomes.



Live life to the fullest.
User currently offlineckfred From United States of America, joined Apr 2001, 5276 posts, RR: 1
Reply 22, posted (2 years 11 months 3 days 7 hours ago) and read 6457 times:

Quoting ikramerica (Reply 16):
This is why I have no sympathy for the unions at AA, especially the pilots.

They hand picked Arpey to be the CEO in 2003. AA should have just entered BK then, and who knows how much better off they would be. But instead they allowed the unions to oust the leadership in exchange for some concessions, and Arpey was installed as CEO.

For years he has tried to keep AA out of BK, to avoid the labor "decimation" that it would allow, and as the years progressed, he was vilified more and more anyway. You'd think that "your guy" in the head office, who is fighting to get you as much as possible while avoiding BK, could be cut some slack, and offered ample compensation to get him to stay there.

Instead, he became the new evil management, his pay was questioned, the APA thwarted his attempts to move the airline forward, etc.

Ultimately, it meant BK 8 years later, with AA in a far weaker position than 2003, and Arpey saying "smell ya later" and bailing on this mess.

I know some AA pilots who were mad as hell at Carty over the retention bonuses. So, when he resigned, they were willing to let Arpey try to guide AA out of the post 9/11 hell that was wrecking havoc with every airline.

But when things didn't turn around as planned, then they start complaining that Arpey was no better than Carty, and that AA needed a real leader, like Bob Crandall.

I reminded them of the mean things that they said about "Uncle Bobby" during his tenure as CEO, as well as the line that Don Cary was just Bob Crandall without the abrasive personality or the scratchy voice with a Rhode Island accent.

One of them said, words to the effect, that they didn't know how good they had it with Crandall.


User currently offlineghifty From United States of America, joined Jul 2010, 891 posts, RR: 0
Reply 23, posted (2 years 11 months 3 days 6 hours ago) and read 6093 times:

What if Arpey himself is the golden parachute.


Fly Delta Jets
User currently offlinegaystudpilot From United States of America, joined Dec 2007, 456 posts, RR: 7
Reply 24, posted (2 years 11 months 3 days 6 hours ago) and read 6046 times:

Glad to hear he doesn't have a big package -- did *I* just say that??

Seriously, I asked about this in another thread. I'm glad he did not receive a huge severance like other departing CEOs. From what I read he took "retirement." I'm curious if anyone know what his retirement package includes, may be spelled out in the proxy. And also, how it differs from the average AA worker.


25 Lufthansa : Well here in Australia, when Ansett failed it was replaced by a much leaner outfit, Qantas was completely forced to change the way it did business do
26 silentbob : It's also a great way to get short term fixes and not long term solutions. When you have options vesting in the next quarter, you have a real incenti
27 KFlyer : Hats off to Arpey! Such CEOs are quite rare. I have always believed that Chapter 11 is a sort of 'cheating'.
28 idlewildchild : I have a new found respect for Mr. Arpey for not taking the parachute. He takes full responsibility, not blaming the unions or workers. Bravo. He clea
29 AAIL86 : Arpey is a classy individual with a strong ethical base. I give him much respect from my time at AA. He just happened to run one of the last companie
30 avek00 : 1. Arpey and the AA management team gave themselves many golden parachutes during his tenure, so he does not leave a poor man. 2. It's smart to refuse
31 aajfksjubklyn : You are correct. He worked his way up the ranks, from a luggage handler-HE COULD RELATE TO RANK AND FILE. He knew what the American dream was. Everyo
32 catiii : Since a golden parachute is an agreement between a company and an employee specifying what that employee will receive if employment is terminated, an
33 rdh3e : The BOD gave them Bonuses, they cannot give themselves bonuses. Besides, so many of those bonuses being in stock options etc, much of that was probab
34 Revelation : I presume you mean stock options rather than stock payments? Add Air India to the list of those stubbornly refusing to change and recipient of gross
35 ultrapig : Like most laymen, airliners members seem to misunderstand Chapter 11. I'll try to simplify a Chapter 11 filing. Thing of a corporation like a Mother p
36 ckfred : Pilots are a strange lot. I know a number of them, mostly from AA, but a few from other carriers. Yes, they are mostly Republican. Some of it can be
37 Mir : Which is why it's better to have options that vest further down the road. -Mir
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