United Pays CEO Smisek $28m to Go Away, Keep Quiet, Not Compete

business_ethics_highlights_2A less-explored aspect of executive compensation in business ethics is executive severance. Although usually addressed in terms of a corporate board’s sympathy with C-level executives, this snarky piece inadvertently stumbles upon the real reason United is willing to pay handsomely its deposed CEO: “Smisek agrees to not do anything for two years that would compete with United, nor can he solicit any United staffers or clients. … He also can’t disparage United …” In other words, a generous severance package isn’t (despite the rhetoric of both the author and a quoted flight attendants’ union spokesperson) an award for bad behavior, but an insurance policy against the even greater damage an ex-CEO could inflict on the company if not under contract. The board presumably concludes that $28 million or so is less than the cost Smisek could inflict using his knowledge of United’s strategy and operations at a competing airline. This piece could be used to motivate a discussion that goes beyond envy and intuitions about distributive justice to address the important disanalogies between executive and ordinary employee compensation and severance. >>>

LINK: Ousted United Airlines CEO Smisek Scores Millions Of Dollars, Free Flights, Airport Parking Forever (by Chris Morran in Consumerist)

In all, [ousted United CEO Jeff] Smisek could receive compensation worth upwards of $28 million — just for being let go amid accusations that his airline created an entire flight from Newark, NJ, to Columbia, SC, just to curry favor with the Chair of the Port Authority of New York and New Jersey, which operates United’s hub airport in Newark.

While it’s not uncommon for top executives to be paid gross sums for being bad at their jobs, some United employees aren’t happy that Smisek is getting off so easily.

“From the worker’s perspective, it’s obviously a different mentality,” a spokeswoman for the flight attendants’ union tells the Washington Post. “We believe there’s something wrong when an executive is awarded over $25 million for failing to do his job.”

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