A federal bankruptcy judge approved the AMR exit from Chapter 11, which includes a merger with U.S. Airways Group Inc. (NYSE: LCC). The same judge declined to put his stamp of approval on a $19.9 million severance package for CEO Tim Horton of the parent of American Airlines.
Some believe Horton was the key to shepherding AMR to relative health since he took on his job in November 2011. Others remember him as a man who fired thousands of workers in the process of cutting AMR’s costs to a level at which the carrier could sustain a profit. That raises the old question of whether CEOs should be rewarded for destroying jobs at the companies that they lead.
Horton’s proposed package is high by almost any standard — $1.25 million a month for his time as chief executive. And that is in addition to any amounts he made in the normal course of business. Horton not only fired a number of workers. He also eviscerated deals with banks and suppliers, which included aircraft makers and companies that supply airline leases. He may have destroyed more of the general economy than he preserved.
Horton would make the point that he had no choice. Others would say that he could have steered the carrier to more success the way that the head of companies like Delta Air Lines Inc. (NYSE: DAL) have done, although Delta has been the beneficiary of its merger with Northwest. Regardless of that, CEOs have alternatives as they analyze solutions to problems. However, at this point it is far too late to figure what the results would have been if Horton had taken another path after the AMR Chapter 11 filing. The lack of proof for an alternative case means he likely gets the benefit of any doubts.
The value of Horton’s decisions can be put aside if the measure of AMR’s emergence from bankruptcy is the only factor in the decision to pay him $19.9 million. The amount would put him at a level of CEO pay for leaders of extraordinarily successful companies. Horton cannot count himself among that group.
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