American Airlines CEO to be paid entirely in company stock

AP News
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Posted: Apr 22, 2015 7:33 PM

DALLAS (AP) — The CEO of American Airlines received compensation valued at $12.3 million last year and will stop drawing a salary and instead be paid entirely in company stock.

CEO Doug Parker said Wednesday that the change started immediately and would make his compensation more in line with shareholder interests.

American Airlines Group Inc. disclosed his compensation and the other changes in filings with the Securities and Exchange Commission.

In 2014, a year of record profit for American and its predecessor companies, about 40 percent of Parker's compensation was paid in cash. He drew a $687,884 salary, got maximum incentive payments of $4.2 million, stock awards valued at $7 million, and $414,092 in other payments including $215,862 to help move from Phoenix to Dallas.

In 2013, Parker was paid compensation valued at nearly $21 million, according to regulatory filings. Most of the pay was in American stock awards, but Parker also got salary, bonuses and stock awards from US Airways, which he led until the two airlines merged in December 2013.

Parker said Wednesday that he asked American's board of directors to stop paying him a salary and annual bonus and to put all of his compensation in the form of restricted stock, some of which will be tied to company performance.

"I believe this is the right way for my compensation to be set — at risk, based entirely on the results achieved, and in the same currency that our shareholders receive," he wrote in a letter to employees.

Parker's deal seems to cut against a trend in CEO pay. Stock grants were attractive just after the financial crisis of 2008 but are less appealing now after a long rally in the stock market — the shares are less likely to rise. Cash payments to CEOs in 2014 grew at the fastest rate in at least four years, according to a study that the Hay Group conducted for The Wall Street Journal.

Parker won't be the only CEO working for little or no salary. Facebook Inc.'s Mark Zuckerberg gets only $1 in salary, although the social media co-founder is a billionaire. The CEO of car-auction company Copart Inc. got $22.9 million last year, all in stock options except a $1 salary and $18,000 in car privileges.

Aaron Boyd, the director of governance research at Equilar, said paying the CEO in stock instead of cash "is usually meant as a demonstration to employees and shareholders that the CEO is really committed to the growth of the stock price."

Parker was the CEO of much-smaller US Airways when he engineered the merger that created American Airlines Group, now the world's biggest airline company by passenger traffic. Both airlines had gone through bankruptcy. Together they have prospered as mergers reduced competition, the remaining airlines limited the supply of seats to boost fares, and jet fuel prices fell sharply in the second half of last year.

American, based in Fort Worth, Texas, earned a record $2.9 billion in 2014. Shareholders did well too — the stock jumped 112 percent, second only to Southwest's gain among the largest U.S. airlines.

The shares rose 4 cents to close at $51.40 on Wednesday. They have lost 4 percent this year.

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David Koenig can be reached at http://twitter.com/airlinewriter