The first proposal, winning with 62% of the vote, urges directors to expense stock options on the airline’s income statement. The measure was aimed partly at preventing what it described as possible “abuse” by companies that see stock options as “free money,” according to a Wall Street Journal report.
Stock option expensing has been in the limelight often in recent months. Earlier, the Financial Accounting Standards Board (FASB) decided to require stock option expensing (See FASB Says Yes to Option Expensing ). The Norwalk, Connecticut-based accounting rulemaker will now move on to determining how to value options and said it expects to have a new rule in place sometime next year.
The other proposal, passed by 55% of Delta’s shareholders, advises the airline to seek shareholder approval in the future for severance packages to top executives when the value of those packages exceeds their salary plus bonus totals by 2.99 times. The same proposal, brought by a Delta pilot, has been defeated in each of the past four years by a wide margin, according to the Journal. Almost identical proposals were also passed recently by the shareholders of Verizon (See Verizon Hears Shareholders Now ) and GE (See GE Shareholders Reject Executive Compensation Proposals ).
While nonbinding, Delta’s shareholder resolutions prompted Chief Executive Officer Leo Mullin to say the Atlanta-based company would give them strong consideration.
Also discussed during the two-hour shareholder meeting were recent steps taken by the airline to ensure the stability of its top managers’ pension plans. Those moves included creation of special individual retirement trusts for 33 senior executives. A similar plan was recently rescinded by Delta’s Texas-based competitor American Airlines, eventually leading to the resignation of American’s chief Donald Carty (See Executive Comp Issue Could Ground AMR Labor Deal ).
However, Delta gave no indication that it would rescind the pension change, which it claims is needed to retain its management team at a crucial time for the industry. Mullin has apologized for his handling of delicate compensation matters at a time when the airline has eliminated the jobs of 16,000 workers and is expected to press for even deeper cuts from its employees.
Mullin previously agreed to slash his 2003 salary by 25% to $596,250, forgo a potential bonus of about $1 million in 2003 and rescind stock-based awards valued at $5.5 million associated with the renewal of his contract late last year. However, he is not giving up any of the special executive pension that was paid out to a trust in his name last year and recently has come under fire for the size of his compensation package (See US Airways President Says Peers Make Too Much ).
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