But today’s annual meeting of shareholders of AMR, the parent of American Airlines, may be an exception.
Four shareholder proposals will come up for a vote, including two related to executive pay. And the airline’s three major unions are expected to have shareholder representatives in attendance at the meeting in Fort Worth, which would be a first.
Indeed, while many companies encounter only shareholders at their annual meetings, AMR’s executives and its board are expected to face many employees angered by $21 million in bonuses received by top executives last month. These workers who took pay cuts and made other concessions worth $1.62 billion a year through 2008, say they want the company to tie executive pay to performance more closely and to put that pay to an advisory vote of its investors.
“Without the concessions made by employees, American would definitely have gone into bankruptcy,” said Gary Santos, an aircraft mechanic at American for 19 years. “From the onset I didn’t like the sound of that slogan they were throwing around — shared sacrifice. It just didn’t ring with any honesty with me.”
Bruce Goldfarb, senior managing director and general counsel of Georgeson Inc., a provider of proxy solicitation services, said meetings had been quieter this year because companies and shareholder activists were working out their differences in advance of the gatherings.
“The actual meetings themselves are not where the action is going to be, it’s going to be in the dialogue leading up to the meeting,” he said. “But in the airline business, the dialogue is different because there are a lot more constituents.”
American Airlines, one of the few major airlines able to avoid bankruptcy after the terrorist attacks of September 2001, is having something of a rebound. AMR earned $231 million in 2006, its first profit since 2000. Passenger revenue last year was almost 30 percent higher than it was in 2002.
Although AMR’s shares have declined this year along with others in the industry, at $25.38, the company’s stock is well above the $6.60 it hit at the end of 2002.
“It’s common knowledge that American has a considerable labor-cost disadvantage compared to other airlines,” said Andrew Backover, a spokesman for the company. “The reality is that American’s employees are among the best- paid in the industry in total compensation, which includes the best-funded pension plan in the industry. As a whole, our employees have benefited greatly from American’s recovery, especially when one considers the many airlines that slashed labor costs and wiped out shareholders by filing for Chapter 11, something we have never done.”
The Allied Pilots Association sponsored one of the proposals on the ballot at AMR this year; it would require that the company put its executive compensation to an advisory vote of shareholders each year. Such proposals have been common at public companies this year but, with the exception of last week’s vote at Blockbuster, have not received support from a majority of shareholders.
An official at the association said that, to his knowledge, AMR had not tried to negotiate to keep the proposal off the proxy.
Members of a grass-roots stockholder and employee group will also attend the meeting. The group, called Pupoff in a reference to AMR’s performance unit plan, a long-term incentive arrangement, has said it would support a shareholder proposal to require AMR to tie at least 75 percent of the stock-based compensation it gives to senior executives to company performance and to disclose the performance criteria it uses to calculate the pay.
Patricia Haddon, a Pupoff member and a flight attendant for 30 years who retired from the company last fall, sponsored the pay-for-performance proposal, her second submitted at AMR in recent years. “As a grass-roots group of employee advocates, we’ve already accomplished our goals with Pupoff.com,” she said. “With a $9.95-a-month Web site we countered management’s attempt to divide and conquer by uniting workers from every department and every base.”
In recent years, Ms. Haddon has criticized American’s executive pay and the company’s extension of travel benefits to people who do not work at American. She has also filed a complaint against the company with the federal Labor Department contending that she was subject to harassment by the company.
Lawyers representing Ms. Haddon said that lawyers at AMR had discussed making a low five-figure payment to Ms. Haddon if she would agree to sell her AMR shares and not buy any more for five years.
Samuel Estreicher, an expert in employment law at the New York University Law School, said it was unusual for a company to try to resolve an employee dispute with a deal that would essentially bar the worker from being an owner and attending a shareholder meeting.
“I have never heard of it and, believe me, I would have,” he said.
Mr. Backover said the company could not discuss conversations it has had with Ms. Haddon’s lawyers except to say that AMR had never offered her a settlement. He said the company denies her harassment accusations and believes that her suit is without merit.
American’s workers have benefited alongside management in several ways, Mr. Backover said. In 2003 they received 38 million stock options at $5 a share, for example. And, he said, the company has not outsourced aircraft maintenance as other airlines have.
AMR has also recently began accruing for a 2007 profit-sharing payout, payable in early 2008 if American reaches pretax earnings goals. Mr. Backover said that the company’s executives received pay at the median of the market and that the compensation was already closely tied to performance.
Brian Foley, an executive compensation expert in White Plains, commended AMR for telling shareholders in the 2006 proxy — and before it was required to — what it would probably pay executives on incentive plans in 2007. But he said investors needed more details about benchmarks used by the company and how management reached them.
“They deserved some credit for signaling in the proxy where they had come out on the 2004-6 cycle, even though they were not going to pay it until April,” he said. “But where is the beef in terms of what were the company’s objectives and what were the accomplishments?”
American Airline workers planned to demonstrate in front of the New York Stock Exchange this morning while the shareholder meeting takes place in Texas.
Samuel Mayer, chairman of the LaGuardia local of the Allied Pilots Association, planned to be among the demonstrators on Wall Street. “What our pilots want to stress to the shareholders is to take back the control of the airline,” he said. “We can do our part, but they should have a say in how the management of the company they own is paid and not just relinquish that to the board of directors or their compensation committee.”