A statement on US Senator Ron Wyden’s Web site said the provision would prohibit companies from giving executives deferred compensation – or retirement funds held in accounts outside of the same program used for all other company employees – if the company’s pension plan is less than 80% funded. “The provision seeks to eliminate that double standard, holding executives accountable for the performance of their company’s pension plans and preventing them from reaping the benefits of outside retirement programs while company employees are hit with the burden of significantly underfunded pensions,” Wyden said in the statement.
As examples of corporate actions Wyden said he would like to prohibit, the lawmaker pointed out that:
- In March 2002, USAir CEO Stephen Wolf took a lump sum pension payout of $15 million. Six months later, the company filed for bankruptcy and terminated its pilots’ pension plan leaving Pension Benefit Guaranty Corporation (PBGC) with $2.2 billion in liabilities.
- Three months before United Airlines filed for bankruptcy in 2002, the company placed $4.5 million dollars in a special, bankruptcy-protected trust for CEO Glenn Tilton. It then terminated all of its pension plans in 2005, leaving PBGC with $6.6 billion in liabilities.
- In 2002, Motorola did not contribute to its pension plan for 70,000 employees and retirees – a plan that was underfunded by $1.4 billion – but contributed $38 million in pension perks to its top executives.
The Finance Committee earlier this week approved a pension reform proposal requiring companies to fully fund their defined benefit pension plans and giving airlines 14 years to pay off their pension obligations (See Pension Bill Gets by US Senate Finance Panel ).