American Airlines CEO Terminates His Own Contract
Photo courtesy of American Airlines
American Airlines has terminated the contract of its CEO, Doug Parker, effective Thursday. Parker himself requested the move, which has widely been seen as a gesture of support for the airline’s employees, many of whom have expressed their displeasure with their employer recently.
Parker will continue as chairman and CEO without a contract. This means that he will not be entitled to receive the substantial compensation and benefits that he was awarded when he took the position three years ago.
Foregoing millions in compensation
Parker explained his decision in a letter to employees: “This was done at my request, because it didn’t seem right to me that I should be the only person at American with an employment contract… The contract protected me against a number of things that I don’t think I should be protected against — such as if I get fired or if unhappy shareholders gain control of the American board.”
Parker has received millions of dollars annually since he became CEO when American merged with U.S. Airways in 2013. He has earned more than $10 million each year, with this year’s compensation package consisting of $10.3 million in American Airlines stock.
This is not the first such gesture by Parker. Last year, he opted to stop receiving cash compensation and instead took his payment in the form of American Airlines stock. This, in a sense, tied his fortunes to the future success of the airline.
Trying to win employees' trust?
Obviously, with millions in the bank, Parker will not be left hurting for money even though he is now an “at will” employee just like everyone else who works for American Airlines. The carrier currently has more than 100,000 workers.
The timing of the contract move shows that Parker is very concerned about labor relations after being confronted by American Airlines pilots recently. They wrote and publicly published a letter that complained about a "toxic culture" created by AA's middle management and also about the fact that they were tired of apologizing to passengers for what they called American’s sub-par service.
In response to this strongly worded challenge, Parker promised to work on employee relations and to attempt to change the corporate culture that had alienated many of the company’s staff members.
Other airlines setting an example
Parker’s task of appeasing employees has been made more difficult because of a precedent set recently by the other legacy carriers. Delta and, especially, United have shown a willingness to compromise with employees during contract negotiations.
Perhaps Parker’s contract move is a way to show that he is taking some sort of action towards finding common ground with unhappy employees. It remains to be seen how AA's pilots and their peers will respond to this kind of “hearts and minds” approach to employee relations.
Parker’s move to at-will employee may buy him some time, but he will eventually have to make a deal with his pilots and with other employee groups, and that may require making some serious concessions.
More by Josh Lew
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