Losing your job is the worst.
Well, for most people anyway.
Turns out Jeff Smisek – the United Airlines’ Chief Executive who stepped down last week amid a federal corruption probe – is not one of those people.
He’ll receive at least $21 million in cash and stock, get to keep the company car, and fly for free for the rest of his life (along with a companion). Read that last sentence again.
Oh, and he can also park for free in downtown Chicago and at airports in Houston and Chicago. And he gets health insurance.
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The value of Smisek’s exit package could be even higher. He’s still eligible for the incentive pay that accumulated before his resignation. In total, Bloomberg estimates he’ll walk away with $28.6 million. That figure is more than double his pay last year, which reached $12.8 million.
Smisek’s departure was tied to a federal investigation into whether the airline launched a money-losing flight from Newark, New Jersey to Columbia, South Carolina, to benefit the influential former chairman of the Port Authority of New York and New Jersey, who owned a vacation home near Columbia.
Hmm.
Smisek’s tenure also comes in the wake of technical glitches that briefly grounded some of the airline’s aircraft this year and a complicated merger with Continental Airlines.
“This is very, very typical,” said Charles Elson, chairman of the University of Delaware’s Weinberg Center for Corporate Governance, according to The Washington Post.
But what isn’t so typical is Smisek’s generous non-cash compensation, according to experts. Not surprisingly, the deal has drawn criticism from the Association of Flight Attendants, which represents United workers.
Apparently, United is even picking up the tax bill for the free flights, which the company has estimated could come to more than $437,000.
According to the agreement between him and the company, United can rescind the deal, but only if Smisek doesn’t cooperate with the company or is convicted of a felony or a “crime involving moral turpitude.”
“The way that CEO employment agreements are written, you really have to commit a felony before they can fire you and not pay you anything,” said Paul Hodgson, a partner at BHJ Partners, a compensation research firm. “Just being bad at your job or immoral or unethical or whatever is not enough usually,” according to The Washington Post.
Part of the reason is because exit packages are usually negotiated in better times when a CEO is hired, not when he or she is preparing to leave after failing at their job. In the negotiation stage, you don’t expect things to end badly.
United spokesman Luke Punzenberger said the company would not comment beyond what it submitted in its Securities and Exchange Commission filings.
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