The New York Times
Executive Pay Proposals Rejected at AMR
FORT WORTH, May 16 - Shareholders of AMR, the parent company of American Airlines, rejected at the annual meeting on Wednesday two proposals aimed at setting controls on executive pay.
The Allied Pilots Association had sponsored a resolution to give stockholders an advisory vote on executive compensation each year. Votes representing about 59 percent of AMR’s shares went against the proposal.
A second resolution that was also defeated would have required that 75 percent of stock options or restricted stock awards given to executives be based on performance. A third proposal, to change the way votes for directors are cast, was rejected.
The only stockholder-sponsored resolution to pass, with 54 percent in favor, concerned special shareholder meetings. It was proposed by John Chevedden, an AMR stockholder who owns 100 shares. It establishes a process by which owners of 10 percent of the company’s outstanding common shares can call a special shareholder meeting. It is similar to proposals recently passed by Electronic Data Systems, Citigroup and JPMorgan Chase. Mr. Chevedden noted in the proposal that the mutual fund giants Fidelity and Vanguard, as well as guidelines from public pension funds, support this right. No person or investment group in AMR now meets this 10 percent threshold.
The two-hour meeting was punctuated by wide-ranging comments from shareholders, investors and union representatives. Some spoke of bitterness and betrayal, while others commended management for stewarding the company back to profitability from the brink of bankruptcy.
Representatives of the Transport Workers Union presented the chairman and chief executive of AMR, Gerard J. Arpey, with an online petition bearing 17,000 signatures that protested AMR’s executive compensation practices. AMR employees and unions have taken pay cuts and made other concessions worth $1.62 billion a year through 2008. Last month, the company’s top executives received $21 million in bonuses, a figure that generated more than 500,000 e-mail messages in protest. Union members feel betrayed by such bonuses, said a spokesman, Bobby Gless.
By contrast, Edward Shapiro, a partner at PAR Capital Management, lauded AMR’s board for its performance during the difficult period since 2002. Last month, AMR announced an $81 million first-quarter profit. In 2006, the company earned $231 million.
In his remarks to the shareholders, Mr. Arpey noted that this was the first time in six years that AMR had been profitable for four consecutive quarters. He said that the company had been “scratching and clawing our way back up since 2002” and had reached a point where it was no longer endeavoring to save itself.
He answered criticism of AMR’s executive compensation by noting that the company had contributed more than $1.5 billion to its employees’ defined-benefit pension plans since 2002, a period during which several rival airlines sought bankruptcy protection. He commended the company’s employees and unions for their cost-cutting efforts and for the ways they had helped increase revenue, including through aircraft maintenance contracts with other carriers.