Siegel’s finger pointing at Mullin was part of an overall comment about a Congressional proposal to provide airline financing on the contingency airlines freeze executive pay. In his comments, Siegel said this plan only serves to reward those who are already overpaid, according to an Associated Press report.
The airline industry, which has been in the doldrums since the September 11 attacks and hit even harder with the United States’ recent actions in Iraq, has been seeking congressional aid. US House of Representatives and Senate committees have passed relief packages in the $3-billion range, but require freezing executives’ pay at 2002 levels as a condition for the aid (See Senate Airline AId Bill May Also Seek Executive Pay Cap ).
Siegel said pay freezes benefit those who have already reaped excessive pay and harm executives like himself. Siegel agreed last year to a 20% cut to his $750,000 base salary, while guiding the airline through bankruptcy. The pay cut will remain in effect for several years, although he is entitled to bonuses and stock options, bringing his total compensation package to an estimated $1.4 million.
However, Siegel’s stock options also became worthless when US Airways filed for bankruptcy, a state the airline emerged from on March 31. With the carriers’ emergence, the company received $1.24 billion in financing to help implement its restructuring plan.
Mullin received nearly $13 million in cash and stock options in 2002, at a time when the company laid off more than 10,000 workers. However, in response to criticisms from Siegel, legislators and others, Mullin announced he would take an annual salary reduction of 15% and forego incentive and retention pay that he could have earned this year. With the reduction, Mullin is now slated to receive $596,000.
He also will skip an estimated $1-million performance bonus, a payment that was contingent on Delta meeting its financial targets for 2003. Additionally, Mullin announced he would rescind a $2.4-million retention agreement and stock options agreement that were part of his five-year contract. Delta estimated the value of the options as at least $5.5 million.
This is the second cut in as many months for Delta’s top brass. Last month Mullin took a 10% pay cut to his $795,000 base salary (See Delta Trimming Executive Pay ). Further, Mullin forfeited nearly $200,000 in salary in the final three months of 2001 to emphasize his commitment to cutting costs, according to the company’s proxy statement.
Delta defended its executive compensation policies in its proxy statement, saying management’s compensation was designed to reward executives for their response to the September 11 attacks and to retain leaders during a difficult time for the industry.