The new shares would be granted to the ESOP, permitting State Street Bank & Trust Co., the trustee of United’s ESOP, to resume sales of the 33 million shares it still holds and put more than $33 million into the employee ESOP accounts. Any new shares issued would then replace the shares sold by State Street, according to the proposal.
State Street had previously been prevented from selling its shares under a court order granted to United , currently pending a December 30 review by a bankruptcy judge. United sought the court order to block the sale over a concern that a sell-off it could prevent the airline access to millions of dollars in tax credits in future years.
Prior to the issuance of the court order, trustees of United’s employee stock plans were selling shares of the stock; State Street had sold 22 million shares held in the ESOP accounts of United employees and Aon Corp, the trustee of United’s 401k plan, earlier reported it sold all the UAL shares it held.
As a result of the sales by the two trustees, United employees now only own about 28% of the airline, critically close to the level at which the airline’s two most-powerful unions would have to give up their seats on the United board.
The latest proposal by the pilots would allow the pilots’ union to retain enough shares of stock to block a provision in the airline’s governance rules that could force its removal from the board of directors. Under that provision, a representative of the pilots’ union and machinists union can remain members of the board only if employees own at least 20% of the company’s stock.
Those two board seats, currently held by the Air Line Pilots Association and the International Association of Machinists and Aerospace Workers, are crucial. The two union representatives on the board have veto authority over many business issues, including United’s selection of a chairman and chief executive officer.
“UAL’s existing governance structure would remain unchanged, thus avoiding the cost, disruption and uncertainty of a governance change at this early stage of the reorganization,” said Paul Whiteford, chairman of United’s pilots’ union and a member of UAL’s board of directors, in a letter to Glenn Tilton, chairman and CEO of the airline.