Bill Moyers takes on the recent near-bankruptcy of Northwest Airlines and why airline executives are still flying high on salaries, stock options and benefits while workers and retirees see cuts in pay and compensation.
BILL MOYERS: Hello. Welcome to the Journal.
We begin with some immortal words from a great American tradition. They were uttered just 20 years ago by Michael Douglas, AKA the Goliath of Wall Street Gordon Gekko:
GORDON GEKKO: “Greed for lack of a better word – is good. Greed is right. Greed works. Greed clarifies, cuts through and captures the essence of the evolutionary spirit.”
BILL MOYERS: Gordon Gekko’s words were ringing in my ears the other day as Northwest Airlines emerged from bankruptcy.
After 20 months of restructuring the company, CEO Doug Steenland rang the opening bell of the New York Stock Exchange.
DOUG STEENLAND: The best way to secure job security, the best way to secure security of your pensions and the best way to increase standards of living is for the airline to be very successful and profitable.”
BILL MOYERS: And if you feather your own nest in the process—more power to you. On top of Steenland’s salary, reported at half a million dollars or more last year, he will get a total compensation package of $26.6 million in stock.
That’s $5.8 million in stock options and $20.8 million worth of restricted stock that will vest over the next four years. And his official next-of-kin — the company’s four Executive Vice Presidents – were offered more than 10 million dollars each, on top of their salaries, if they stay on for four years.
Oh, yes, Gary Wilson, the outgoing chairman — who already has $21 million dollars from stock he cashed in just before the bankruptcy — will get a two million-dollar good-bye gift plus medical and dental insurance for life — that’s right — for life.
As for the folks who merely fly the planes, fix the engines, and serve those meals — I mean, snacks — well, they took pay cuts of 20 to 40 percent, as well as curtailed medical benefits, fewer days off and frozen pensions.
JUDITH FISHER, FLIGHT ATTENDANT: When you have veteran employees that have given a lifetime of commitment to service and good employment to this employer. It made me really really angry. Very sick to my stomach when I my pension has been cut and frozen.
BILL MOYERS: No wonder Northwest pilots, flight attendants and machinists were out in protest on the steps of the Minnesota state capitol last week.
To keep the airline aloft, pilots increased their working hours by as much as 20 percent while taking a pay cut of 40 percent.
PROTESTORS: We built these airlines, we built this company. Let’s take it back today.
BILL MOYERS: To make ends meet, pilot Ron Hay has to sell his house and move his family back to his wife’s hometown in Texas.
RON HAY, NORTHWEST PILOT: Our CEO’s $26.6 million is one complete annual payment to our pension fund. Our pension fund could be one more step closer to whole. The $25 million is probably in excess any funds needed to bring us back down to a medical benefit that we wouldn’t have to pay anything.
BILL MOYERS: Amanda and Trevor Olson are both flight attendants, and they are already feeling the cuts to their medical benefits. To cover the birth of their second child they had to pay almost $4000 out of pocket — that’s more than ten percent of a flight attendant’s yearly salary which tops out at only $35,000 dollars a year.
AMANDA OLSON: It just kind of points to how disgusting, to me, the executive compensation plan is. That they can reap so much in stock options and pay. And we’re not even getting a cost of living increase in the next five years of our contract.
BILL MOYERS: Three of Northwest’s unions cried foul…and filed objections in us bankruptcy court — calling the management equity plan “obscene.”
Forget it, Judge Allen Gropper decided. He ruled that rewarding $300 million dollars in stock to the top executives is not illegal or unfair.
To the contrary, he said, “any incentive plan that is intended to keep management from jumping ship and leaving for another company in today’s market must be very generous… ”
RON HAY, NORTHWEST PILOT: The court testimony was that our executives need to be compensated along the realm of executives at GM or Dell or other large corporations that create a profit through selling a product and growing their company. Right now, Northwest Airlines is on the verge of making a profit because they took concessions from– primarily labor..and of course the materials that they purchase and the aircraft leasing etc.
BILL MOYERS: In fact, of the $2.4 billion dollars in expenses Northwest had to slash — cuts in worker’s pay and benefits accounted for 60 percent.
And workers have very little ability to jump ship the way that management can.
RON HAY: It’s taken me 20 years to reach this period. And if I were to quit and go to a competitor, I start over on probationary year, first year pay. And right now, that’s in the lower 30s at most places. And I can’t feed a family.
BILL MOYERS: Now it’s true that CEO Steenland has to stick around for all of four years to get his stock — worth more than 20 million dollars. But don’t blame him for making off with all that loot – his board of directors made him do it.
DOUG STEENLAND, CEO NORTHWEST: The decisions that were with respect to executive compensation were made by the Northwest board. Were made by the compensation committee of that board which is fully independent. Management had no say no participation or involvement in that.
BILL MOYERS: Gordon Gekko wasn’t quite so humble. Remember that scene in WALL STREET when Gekko’s young disciple, Bud Fox (played by Charlie Sheen) discovers that Gekko plans to eviscerate Blue Star Airlines?
Bud’s own father is a mechanic for Blue Star and it dawns on the son that his father is about to be hung out to dry…while Gekko is golden.
WALL STREET CLIP: Of course the beauty of this deal is the over-funded pension. Gekko makes 75 million dollars there. 15 million buys him the minimum annuity for $6000 employees and he walks away with the rest – I figure he’ll clear 60-70 million dollars. Not bad for a month’s work.
BILL MOYERS: As in the movies, so in real life: the big boss rakes it in…while the company’s employees will continue to struggle for years to come.
Northwest is the last of four major carriers to come out of bankruptcy after the 9-11 terror attacks.
But it is not the first airline to use bankruptcy to keep operating while it cut costs, convinced creditors to exchange debt for equity, and rewarded executives after wringing concessions from the rank and file.
When US Airways emerged from bankruptcy in 2005 CEO Doug Parker was awarded almost six million dollars-worth of stock and cash.
Employees got pay cuts of up to 53 percent:
• pilots’ top salary is $120,000.
• Mechanics earn at most $48,300.
• And flight attendants’ top salary is just over $34,000.
When United Airlines came out of bankruptcy in 2006, CEO Glenn Tilton was awarded stock options and awards that, over four years, would earn him almost $40 million dollars. More than the airline’s $25 million dollar profit that year.
Employees, on the other hand, got pay cuts of up to 50 percent:
• pilot’s top pay is $158,200.
• Mechanics earn at most just over $52,000.
• And flight attendants at most $37,600.
Only Delta Airlines CEO Gerald Grinstein didn’t follow the Wall Street script.
When Delta climbed back from bankruptcy this past April … it’s employees took pay cuts of up to 40 percent. And Grinstein actually turned down 10 million dollars in compensation.
REP. ELLISON (D-MN): Let me tell you in 1980 a CEO made 40 the average worker today they make about 400 times. This is wrong.
BILL MOYERS: Back in Minnesota, a new member of Congress, Keith Ellison, is rallying Northwest’s unhappy employees.
REP. ELLISON (D-MN): Let no one be in doubt about what’s happening here stock options for them… paycuts for us. To hell with that. We can’t have that anymore. No. No.
KATE DAY, FLIGHT ATTENDANT: You know, we know what’s right. And when the rest of society catches on that this isn’t just about your flight attendant, it’s about your daughter. And it’s about your son. And it’s about what kind of life and fairness and compensation you expect for your children that they will see that this is everyone’s fight. This is not about a flight attendant contract, or a pilot contract or a mechanic contract. It’s not any more even about the money. It’s about what’s right in our culture. What’s right?
GORDON GEKKO: “I look at you and I see myself. Why?”
BUD FOX: I don’t know.
BILL MOYERS: Sometimes it turns out right, even if it’s only in Hollywood. In WALL STREET Young Bud Fox comes to his senses, saves the airline, turns Gordon Gekko in — and gets caught himself — for insider trading.
But hold on: Gordon Gekko will soon be back. 20th Century Fox signed a deal recently to produce a sequel to WALL STREET titled, MONEY NEVER SLEEPS. So twenty years later Gekko is returning — no doubt this time as a hedge fund manager.
This transcript was entered on May 20, 2015.