The departures announced today are in connection with the company’s previously disclosed internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey.
That’s the line, buried in the press release issued by United Airlines yesterday afternoon announcing the departure of three senior executives including CEO Jeff Smisek, which tells the real story. It appears in paragraph eight of the press release but it is atop the message sent to employees by incoming CEO Oscar Munoz, a clear indication of the importance of that news and the impact it has on the decision to push Smisek out. And so, under these cloudy skies, a transition is taking place at the Chicago-based carrier.
Smisek gets a nice payday – nearly $5mm in cash – and still has a lot of stock options. But the contract includes a claw-back clause. If he is convicted of a crime or pleads no contest to charges based on actions he took while the CEO those funds, along with his other retirement benefits, will be revoked.
As for the “Chairman’s Flight” being talked about so much as the impetus for his departure, I’m not so convinced. Yeah, that was bad, but it is not hard to show some numbers from an internal analyst which suggest it might be worth trying out a flight to see if it can stimulate traffic on a route. And, having worked as an attorney helping to build the Enron empire Smisek would know all about building up complex structures and hiding the inappropriate bits well. Either he didn’t learn the last time around or he was convinced he learned to do it better enough that this time he wouldn’t get caught.
I will not be at all surprised to learn in the coming months that there is more to the story than the Chairman’s Flight. That may have been questionable or even stupid, but probably not enough to get a CEO fired.
As for the cloud of suspicion and confusion this move leaves hanging over the company, I suppose that’s okay in the end. Someone will call it an uncontrollable irregularity and suggest no compensation is due to the affected parties. Clouds are like that, after all.
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