By Mitchell Schnurman
mschnurman@star-telegram.com
When people say it’s not about the money, it usually is.
But clichés don’t always fit, and that’s the case with Tom Horton and American Airlines. Last week,
The New York Times’ Andrew Ross Sorkin wrote that Horton was dragging his feet on merger talks with US Airways CEO Doug Parker, because Horton stands to get a huge payday if American emerges as a stand-alone company.
In past bankruptcies, management has received 5 to 10 percent of the stock in the emergent company, with CEOs getting up to 1 percent.
"If you follow the money, you can see why Mr. Horton may want to avoid a deal, at least for now,"
Sorkin wrote in his DealBook column. "On the other hand, if you follow the money, you can also see why Mr. Parker may want a deal. Surprise, surprise: there is a change-of-control provision in his employment contract that could kick-in if it is bought by another company and he is ultimately forced to leave. Depending on the structure of the deal, Mr. Parker could be paid more than $20 million."
Sorkin is one of the most influential business journalists in the country, and I’m a big fan. But it’s hard to reduce the Horton-Parker showdown to money, even tens of millions of dollars. My take is that these guys are in it to win it – for their ego, their legacy and the future of their respective airlines.
It's
no surprise that management gets a reward for navigating a company through a grueling bankruptcy, and for the hits it took in the reorganization. American’s pilots, for example, have
a 13.5-percent stake in the emergent company in their current contract offer. That’s more than the management group will get.
Equity awards are the currency in bankruptcy, because secured creditors lock up the excess cash, so there will be lots doled out. And I figure that Horton and Parker will get paid either way.
If Parker prevails and forces the AA-US Air combination, Horton will earn a pretty sum to facilitate and walk away nicely. If Horton runs the merged company, Parker gets his golden parachute, as outlined in the contract. Those sweeteners are in place, so that execs won’t block a good deal for shareholders, even if it costs them their jobs.
But did Parker pursue a merger with American to trigger that payoff? Please. The money would be a consolation prize.
Parker needs American to create an airline that can compete with any carrier in the world. And he wants to be piloting it. Push a merger and make it work, and he’ll earn the kind of respect and acclaim that no money can buy. In the process, he believes that tens of thousands of employees will have a brighter future.
Horton is driven by similar motives. Like Parker, he passionately believes that he has the best plan to make American a leader again. Analysts and the press (including yours truly) have hammered Horton and American execs for months -- for their cornerstone strategy, for lousy labor relations, for
being outmaneuvered on mergers -- and Horton’s determined to prove everybody wrong.
Horton and Parker used to work together at American, and they’re almost the same age (Horton, 51, and Parker, 50). Most important, they’re playing a zero-sum game, with their careers and reputations hanging in the balance.
It's a cliché to say that some things are more important than money. But clichés are usually true.
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