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Unions call NWA stock awards 'obscene'
Northwest released its plan for granting equity to its CEO and other top executives. Unions will oppose the plan in court.
By Liz Fedor, Star Tribune
Last update: May 05, 2007 – 9:33 AM


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Doug Steenland, CEO of Northwest Airlines
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Northwest Airlines revealed Friday that it plans to award CEO Doug Steenland $26.6 million in equity in the restructured airline.
Executive vice presidents Neal Cohen, Tim Griffin, Andy Roberts and Phil Haan would each receive equity grants of between $10 million and $13.5 million.
When Northwest emerges from Chapter 11 bankruptcy protection next month, Steenland is expected to be allocated restricted stock with an estimated value of $20.8 million. In addition, he is set to receive stock options with a valuation of $5.8 million. Both types of awards would vest over four years.
Leaders of Northwest unions, whose members have taken double-digit pay cuts to return the airline to solvency, labeled the stock awards "outrageous" and "obscene."This crew of robber barons used the bankruptcy process to extort the wages of its employees for excessive concessions. Now those executives are enriching themselves to obscene proportions," said Wade Blaufuss, a spokesman for the Northwest branch of the Air Line Pilots Association.
Northwest pilots took two rounds of pay cuts -- of 15 percent and 23.9 percent -- and agreed to other contract changes that are saving the airline more than $600 million per year. "We have pilots and other employees who are going through their own personal bankruptcies," Blaufuss said.
The Friday release of the details on the stock awards for the top five executives came just days before Northwest flight attendants begin voting on a contract that saves $195 million a year. A 15-year flight attendant averages $35,433 a year.
Flight attendants have taken pay and benefit cuts, and they have been working longer hours under imposed terms since last summer.
"For them to announce this now at such an outrageous amount of compensation shows how out of touch they are with their own employees," said Andy Wisbacher, vice president of the attendants union.
"The executives keep talking about retaining executive talent," said Wisbacher, of the Association of Flight Attendants at Northwest. "What they should be worrying about is retaining employees, instead of taking their sacrifices to retain the executives who drove us into bankruptcy."
The attendants will vote on a third tentative agreement from Monday through May 29.
Stephen Gordon, a top official with the International Association of Machinists and Aerospace Workers, said the IAM will join the pilots union in court in opposing the management equity plan. He described the stock allocations as "morally wrong."
The equity plan will be included in Northwest's reorganization plan, which must be confirmed by the bankruptcy court before Northwest can leave Chapter 11. A hearing on the plan is scheduled to begin May 16 in New York.
Northwest, in a statement, cited four reasons for the size of the awards to its executives. The carrier said the awards would allow Northwest to recruit and retain executives, to align compensation with the company's financial performance, to create a market-competitive plan that fairly compensates executives and to compensate CEO Steenland at a level that is competitive with his peers.
Northwest also said that Steenland's award is appropriate in the context of the stock awards given to other airline executives. In a Northwest chart, based on regulatory filings, it showed that Doug Parker, US Airways CEO, held stock worth $40.7 million as of the end of last year. American's Gerard Arpey had equity worth $37.7 million, followed by United CEO Glenn Tilton with $27.1 million and Continental's Larry Kellner at $14.9 million.
US Airways and United also were in bankruptcy in recent years.
Some Northwest employees have noted that Gerald Grinstein, Delta's chief executive, has refused to accept equity in Delta, which left bankruptcy this week.
"Comparisons between the equity compensation of Gerald Grinstein and Doug Steenland are apples and oranges," Mike Becker, Northwest's senior vice president of human resources and labor relations, said in a prepared statement Friday. "Management equity plans are designed to incent and retain executives who will lead the organization in the future.
"Mr. Grinstein has announced his intention to retire from Delta later this year and, as such, declined participation in Delta's equity plan. Northwest's board of directors, on the other hand, wishes to retain Mr. Steenland as Northwest's CEO."
The values Northwest placed on the restricted stock and stock options are based on the projected price of the airline's stock when Northwest leaves bankruptcy.
Liz Fedor • 612-673-7709 • lfedor@startribune.com


Obviously as a leader and the job he was tasked to complete with NWA provides reason for Steenland to receive a handsome pay. However, I question the amount in stock options that he will be due. Sure he can only cash them in at restricted quantities with approval of the board and as Delta has shown airlines recently coming out of bankruptcy have their stock prices fall from the initial "new" IPO, but is this ethical? Personally I would have a hard time, as the union members voice, harshly negotiating pay cuts across all unions only to receive stock options in the millions in addition to a handsome base salary. As a leader I would expect to lead by example as well as in voice. But then again he will probably be gone shortly after NWA's exit from bankruptcy having completed the job he was brought in to do.