Equality of Sacrifice
Wed Apr 09, 2008 at 06:17:41 AM PDT
Yesterday, on my blog (Women, Unions and Our Stories), I wrote about Dick Dauch and outrageous executive pay.
As the economy continues to slow, the housing crises continues to develop, home prices continue to fall, gas prices continue to go up, and the cost for just about everything in our lives rises from rice to wheat to a glass of milk...well it's on this vein that Warren Brown at the Washington Posttook the owner, Dick E Dauch, and his top executives, to task for, well, being complete asses...
more on the flip
Equality of sacrifice -- it is on that issue that the management of American Axle did something so dumb, it borders on the unforgivable. While demanding that its workers accept cuts in pay and other compensation to help the company underwrite future development and competitive costs, American Axle's top four managers gave themselves hefty raises.
Richard E. Dauch, 65, the company's chairman and chief executive, earned $10.2 million last year -- $850,000 more than in 2006, according to Securities and Exchange Commission filings. American Axle earned $37 million in 2007 after posting a net loss of $222.5 million in 2006, when it began hinting that its workers would have to give something back for the company to keep moving forward.
It just doesn't sit right. It matters not that the company is Dauch's company, or that he can move it to Mexico if he wishes. It is simply wrong to ask the troops to bleed while the generals feast.
No one wins wars that way. And no company trying to gain a favorable position in the future of the global automobile industry will succeed using such an ill-considered strategy.
Today, I’m struck with a similar issue in the cost of Skycap service.
Does anyone recall the new fees that went into effect right around 2005?
I started seeing $2 per bag charged at USAir Skycap sights about a year ago, perhaps 2 now. I’d often tip the skycap $2 per bag. It’s a service and I figured they were tipped employees, probably without benefits and underpaid.
So, I’d use the service every now and then. I avoid the lines, feel good about giving some cash to a poorly paid worker (and usually someone who also gave me great service).
Then the $2 fee started.
I used the service a little less when I flew. Then this year, I stopped using it altogether. If I paid $2 per bag to the Airlines, and then an additional $2 for the skycap, that’s $4 to $5 a bag depending on how heavy (I tip more for heavier items) and with 4 checked bags, that’s now costing me $20 for my daughter and I. It doesn’t take an accountant to figure out that sucks.
If it sucked for me, can you imagine how the Skycaps felt? From the Boston Globe (Boston.com)
Tony Pasuy has worked as a skycap for American Airlines at Logan International Airport since 1993 and says he always loved the job. Dressed in the airline's trademark blue-and-white uniform, he helps travelers check in luggage outside the terminal, hoists heavy suitcases onto carts, and guides people in wheelchairs. Many passengers apparently liked him, too, giving him about $200 a day in tips, he said.
WELL, that is until American Airlines started to charge $2 per bag, that’s when all hell broke lose. Again from the Globe:
But American Airlines says it has done nothing wrong. It points out that signs posted at curbside kiosks say the fee excludes gratuities. The carrier says in court papers that it imposed the fee at Logan and other airports after losing $821 million in business in 2004 and contends that declining air travel after 9/11 may have caused tips to fall.
The airline is also challenging the credibility of the skycaps. Under questioning by lawyers for the airline and the skycaps, Pasuy acknowledged that he failed to report his tips to the IRS in recent years and said he earned only $8,001 in 2006, far less than his actual income.
Several airlines - including United, US Airways, and Northwest - began charging a baggage fee in recent years, but the suit in US District Court in Boston is the first to challenge it, Shannon Liss-Riordan, a Boston lawyer for the skycaps, said in an interview. Her firm is helping to prepare a similar suit against US Airways, she said.
Isn’t that sweet of American Airlines? Pointing out that tipped employees don’t always declare all of their income? I think it’s so sweet. I know that when I waited tables, I declared every penny because come tax time, there’s nothing like getting screwed for working without benefits, sick leave or adequate pay. Of course, American Airlines could just provide adequate pay and benefits to the skycaps to make up for the loss of the income, or, they could just fight them in court, instead. Which do you think they chose to do?
Tim Smith, a spokesman for Fort Worth-based American, said the carrier "is disappointed by the verdict and the amount awarded" and is evaluating its legal options.
So, the skycaps (who were contracted through another company) sued over their lost income and THE SKYCAPS WON!!
A federal jury in Boston on Monday determined that American Airlines (AMR) diverted more than $325,000 in tips from nine skycaps over the past two years since it imposed a $2 fee for curbside bag checking.
Steven Pearlstein at the Post linked this story to executive pay excess, you know, like the 10.5 million package that Dick Dauch issued to himself last year while asking his hourly employees to take a 50 to 60% pay cut this year? Well, Steve had even more scathing reviews of other executive excesses, let’s take a look:
This is not just another story of the incredible stupidity of airline executives and their willingness to sacrifice long-term customers' satisfaction and loyalty to short-term financial pressures. It is also a story of rank hypocrisy. It is these same airline executives who are constantly defending their own generous pay packages -- and those of other corporate executives -- by arguing that you can't retain and motivate key executives if they don't have the carrot of bonus pay dangled in front of their noses at all times.
That's certainly the approach being taken by Washington Mutual, the country's largest thrift, which was to the no-money-down, no-documentation mortgage loan what Drexel Burnham Lambert was to the junk bond. Now WaMu, as it is called, expects to write off $12 billion in bad loans when all is said and done. Its stock price has declined 70 percent over the past year.
Given those dismal results, it seemed only fitting that chief executive Kerry Killinger decided to forgo taking the $1.2 million bonus that he was entitled to under the company's executive compensation plan last year, settling for a measly $5.3 million in cash and stock. Other executives typically saw their bonuses cut in half.
Next year, however, things will be different. According to the company's recent proxy statement, WaMu's board of directors has decided that the bonuses for Killinger and 3,000 other top executives will be based not on net income, as is customary, but operating income, along with cost containment, fee income and customer loyalty -- all criteria that just happen to ignore the disastrous loans of the past. The board's rationale is that the point of the bonus program is to keep executives focused on improving the company's performance going forward. Or to put it another way: There's nothing we can do now about their past screw-ups, but the important thing is always to keep the carrot dangling in front of those donkeys up in corporate.
These two stories -- the one about the airline porters and the other about the WaMu executive bonus plan -- provide a window into the hypocrisy that permeates corporate thinking about incentive pay. The twisted logic goes something like this:
When times are tough, it's okay to rob the tip jar of front-line employees to make sure that there's still plenty of change in the tip jar of millionaire executives.
(EMPHASIS MINE)
Steven, you should have added Dick E Dauch to this list of out of touch executives ready and willing to rob their employees, it would have been just another very clear example of rampant hypocrisy in US executive pay.
As for Mr Pasuy and his 8 other co-plaintiffs, congrats. Hope you’re not able to make this a class action suit on behalf of all sky caps. It’s about time we had better Robin Hoods to match wits with the Robber Barons of these times.
Permalink | 6 comments