United CEO Rejects 2017 Bonus (Don’t Worry, He Still Made Nearly $10 Million)

In late 2015, Oscar Munoz was appointed as United’s CEO. Oscar Munoz was universally loved, including by employees and passengers, which is extremely rare. It seemed like he really wanted to change the airline for the better, and he made his motto “actions speak louder than words.”

Unfortunately for Munoz, United has had a really rough time in 2017 and 2018, with seemingly more public relations nightmares than any other airline. On top of that, the airline tried to change the bonus program for employees in a way that created a lot of anger among employees, negating a lot of the goodwill that he has built up.

Last month I wrote a post titled “The Disappointing Tenure Of Oscar Munoz,” which sums up my thoughts on the topic. I actually think Munoz is a good guy, I just don’t think the board ever intended for him to really lead the company, or else they wouldn’t have appointed Scott Kirby as president shortly thereafter. Scott Kirby is a bean counter, and his strategy is very different than that of Munoz.

I do have to give Munoz a lot of credit for something that has just been revealed in an SEC filingOscar Munoz will be turning down his bonus for 2017. He wrote a letter to employees on Monday in which he said the following:

“I felt it was important to send a message about the culture of accountability and integrity that we are building here as a United team. We had some incredible successes in 2017 but also some setbacks.”

I obviously have to commend Munoz for this move, since there are tons of airline executives who would never turn down a bonus. Ever.

However, I do think it’s worth acknowledging that he wasn’t exactly working for free. His 2017 compensation ended up totaling $9,561,134 without the bonus he turned down, which says a lot about executive compensation in the US. That’s still significantly less than the $18,720,548 he made in 2016.

As a point of comparison, United president Scott Kirby made $6,107,618 in 2017, compared to $7,163,015 in 2016. For Kirby, under one million dollars of that was part of the non-equity incentive plan, which is what Oscar Munoz turned down. In 2016, Oscar Munoz’s non-equity incentive plan totaled $3.5 million, so it was only about 20% of his total compensation.

Bottom line

We have to give Oscar Munoz credit for turning down a bonus, since that’s something a lot of executives would have never done. However, in reality he still made nearly $10 million, so I’m not necessarily sure how relatable his message of accountability is to employees.

What do you make of Oscar Munoz turning down his 2017 bonus?

Comments

  1. Everybody I know working at UA still supports Oscar. He’s still incredibly popular among rank and file. This will simply bolster that support

  2. Isn’t the actual problem that the board voted to give him the bonus, thus signaling that his performance is just fine with them?

  3. I would never begrudge someone for making however much money possible. I find it comical when people outside business industries criticize high ranking officers for making enormous salaries and bonuses.

    The bottom line is that these people are paid as much as they are worth to their companies, period. Your value is whatever someone else will pay you.

    I wish someone would pay me 30 million $ per year to play basketball but I’m terrible at the game. By the same token I don’t think Lebron James gets paid “too much”.

    Munoz took a self inflicted 20% hit to his income this year. That’s not insignificant. Just because we decide that 10 million $ is “enough” for someone doesn’t minimize what he did.

    Conversely, we should also not criticize anyone for accepting their bonus either.

    Google’s CEO Pichai just realized a bonus of over 350 million$. Is that “too much” to be paid for someone leading arguably the most important website on the internet?

  4. Still no mention from you after two weeks on the Polaris seats maps, accelerated delivery schedules for fleetwide completion of Polaris by 2020 for ALL widebodies (including 787s). And the opening of the Polaris lounge in SFO on Friday and Newark and Houston opening at the end of May. This is major positive progress from United.

    I would think that’s worth a mention?

  5. Vijay, the problem isn’t that people make more money the problem is that they make underserved money. It had been a white mans club for too long, like a cult, not open to other non white qualified people but more importantly people made a lot of money by taking risks that only show up long term while being profitable in the short term. Cutting costs without investing in the future is a cheap trick. In effect they are stealing from the shareholders and long term owners. So they are thieves nothing less. A lot of banks before the crisis were taking risks by making bad loans that a reasonable person would not expect to be repaid. No one went to jail for this. In that respect Obama the CEO of the country was also an asshole. He got big campaign contributions from wall street and his DOJ didn’t prosecute. Right wingers say he played the race card and in this respect he did. If he had been white he would use been skewered for his light weight legislative achievements but he knows he will get away with stuff because he is black (liberal guilt and all) In reality he is more white than a lot of Americans. And now he runs around giving speeches that cost a million (like Clintons). That is pure corruption. More learned people get paid far far less for giving talks at conferences that involved a lot of work.

    So no one begrudges a well earned bonus. People begrudge bonus gotten through shennanigans.

  6. @wpr8e Lucky will never admit anything positive about UA, he might delegate that to one of his minions but you won’t hear it from him. He’s still bitter he got caught defrauding the company and got banned.

  7. @Vijay, yes because they are still humans and there are only 24 hours in a day and 365 days in a year. It is laughable to say they work 1000x as hard as their median worker.

  8. anon says:
    April 24, 2018 at 10:01 am
    @Vijay, yes because they are still humans and there are only 24 hours in a day and 365 days in a year. It is laughable to say they work 1000x as hard as their median worker.

    Wrong. It’s simple economics. You’re rewarded relative to the economic (or accounting, to be more precise) value you create for shareholders as an executive. If an executive, e.g. Steve Jobs, does something tremendous or comes up with a phenomenal idea (iPods, etc.) that make tons of money, why shouldn’t the CEO’s bonus be 1000’s of times the lowest paid employees’? Sure, plenty of people are responsible and accountable for executing on that idea/strategy, but the C-suite has the ultimate duty to deliver and they assume the most risk should they fail. I know it sounds and feels immoral almost, but that’s free market economics.

    Now, as a matter of practicality is your average CEO appropriately compensated? Who knows. For example, are they risking long term profitability for short term gain so the stock hits a target and triggers a bonus payout? I’m sure some are, but that doesn’t argue against the fundamental principle behind executive compensation.

    The primary place I see this principle being “not applicable” is in civil service. If World War 3 breaks out and some 4 star generals save us all thanks to a brilliant combat strategy, Congress isn’t going to award them like a $100 million bonus…even though you could easily argue that the value they “created” by saving millions of lives is immeasurable.

  9. @Jay
    “value you create for shareholders as an executive” wrong again. The value is created by the workers. The executives don’t actually do any of the work. It’s laughable to attribute “value created” of a Fortune 100 company to one person

  10. Oh I missed the most laughable part of all : suggesting that steve jobs “created” any of the i* products. He didn’t, the designers, engineers, manufacturing line workers, etc etc created the products. He just happened to be the guy at the right place at the right time.

  11. damn. I didn’t read the whole post and missed the truly laughable part. The people that save us in a war aren’t the generals, they are the soldiers, the boots on the ground risking their lives in actual combat.

  12. Sure, he still earned a handsome sum (he’s CEO), but the fact remains that he *voluntarily* turned down a hefty bonus. Gestures like this are noticed by employees and can have a lasting impact to employee morale and level of trust in management – something I think we can all agree UA would benefit from.

  13. He did the right thing by declining the bonus but it only stands out by way of contrast to virtually every other CEO. Most will take every cent, even in the context of lamentable performance. The universal problem is with scandalously abysmal oversight at Board level; 99.99% of them continue to approve performance based bonuses right up to bankruptcy proceedings.
    They feed at the same trough.

  14. Here is a timely article of how republican CEOs are stealing. The same mantra cut short term costs at expense of long term profits. And there are enough white stupid fucks that they will swallow even with evidence and experience to the contrary.

    ttps://mobile.nytimes.com/2018/04/23/opinion/teachers-protest-education-funding.html?action=click&module=Opinion&pgtype=Homepage

  15. He should have donated the bonus to the charities of his choice. United surely won’t need that bonus go back to its coffer. We, as a society, have lowered our standards and expectations of the leaders and executives to the extent that we enable, condone and rationalize their misconducts and misbehavior. The success of the company does not rest solely on the CEO but the advancement of the country relies on the long term vision of its leader. Have we ever seen any CEO paid back his compensation package within 5-10 years before the company was in Chapter 7 or 13? The board members are in cahoot with the CEO because he appointed them. Their interests are aligned with those of share-holders: Maximum profits in short term time frame. The employees of the company have pensions, paychecks and health coverage vested with the company. The Walton family has five billionaire siblings. Yet, 40-60% of Walmart and Sams Club employees receive government welfare. Capitalism in the States has gone into the abyss in the last two decades.There is no rational justification of the executive compensation package in the country when the difference between the top earners and the lowest earners is more than 2000%.

  16. People like anon don’t understand how the world works. No, Oscar does not work “1000x as hard” as the rank and file, but that’s not how value works in the real world.

    Just like how a $500 bottle of wine is not 25x better than a $20 bottle of wine. $500 is simply the amount is requires to replicate the experience of the more exp.

    Executives get paid the big bucks because that’s what’s required to have someone of their caliber. It isn’t arithmetic.

  17. I am glad my comment sparked this discussion and revealed such a poor understanding of basic business and economic principles from guys like anon!

    Let’s just pay everyone the same no matter the job – that should work out just fine like it did in the USSR!

    I know it’s tough to believe, but those that own “capital” will profit off those who supply it. This is the inherent nature of capitalism and is what drives our economy. CEO’s are appointed directly by majority shareholders (owners).

    What drives people like anon crazy is he can’t understand how someone can be worth so much compared to an average worker.

    I suggest anon to go start a small business of your own. Please make sure that after you put in all your own money to start it, you go ahead and share profits equally with your employees, suppliers, etc. It would otherwise be unfair for you to take the lion’s share of reward!!

    There are definitely places we need to improve in our economy – specifically raising the minimum wage to a true “livable” wage. But villainizing CEO’s is simply a waste of time.

  18. @Vijay – not worth the effort to argue with ignorance, unfortunately…but I’ll take one more ding at anon!

    @anon – you definitely sound like a closet communist, whether you realize it or not. And I’m guessing you’re relatively broke. As far as the general/soldier analogy, soldiers just follow orders you genius (yes, I’m an enlisted veteran). The STRATEGY is dictated by those with stars on their uniforms. Even a superbly executed (by the soldiers) horrible strategy will lead to A LOT more soldiers dying than executing an excellent strategy with half-assed effort.

  19. He “turned down” his bonus because he attempted to turn the bonus structure of front line employees in to a lottery. Which in turn would have saved almost $40 million in bonus payments for united. This is optics to make their farce of a bonus program look better and nothing more.

  20. Pretty telling if he had to ‘reject’ a bonus, as opposed to the board, or company structure being such that this year’s performance makes him ineligible. Corporate boards and their incentives need a serious rethink.

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