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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Well, Seth, you make some good points, but a respected former CEO of Continental, who knows both Smisek and Munoz said that he felt that the New Jersey issues were mainly political. Gordon Bethune, who like his successor Larry Kellner were admired by many, says that the UA Board was fatigued with the issues and wanted a fresh start. So unlikely criminal issues, but clearly, big changes at the very top of the organization. Let’s hope that Munoz has the people and management skills to bring back the vibe when Bethune and Kellner ran the airline.
I’ve read Bethune’s comments several times and I respect them. I also do not believe that the Board was so tired of him that they needed this as cover to boot him out. If they’re paying the severance anyways they could have acted at any time. The CAE route may have just been political blustering but there were also the ACY routes and potentially other, questionable actions. I will not be surprised if more specific and damning details come out at a later point in time.
Even if there’s more to the story, I’d disagree that bribery alone isn’t enough to get him fired. Given the amount of dislike for US carriers at the moment, and the overall distaste for the flying experience by the general public – due also to TSA’s gross incompetence – United has several black-eyes already, and a federal indictment is the last thing they need with satisfaction at all-time lows. He clearly wasn’t adored by either employees or customers, but I would hardly imply that bribery of a government official is some sort of Red Herring.
Perhaps poorly made, but my larger point was trying to be that the route story alone is likely not sufficient to be bribery. I think that the investigation – internal or otherwise – likely uncovered other things which made it a real problem.
Seth, a single flight from a hub to another smaller town is nothing. Using it solely as an obvious bribe for a public figure is most certainly not.
To me, that alone is more than enough t get anyone canned, especially in the litigious days in which we live.
And if not, then the sheer stupidity of cratering the flight just days after it was no longer “needed” should be enough to send Smisek et al packing.
Seth, you and I have met Jeff (and Larry ) several times. Even with one strike against him (because he’s a lawyer) I always got the feeling that Jeff made decisions with COnited’s best interests at heart. The art of the deal. Look at Trump. If Jeff had to give a little out of the left pocket to get more for UA in the right pocket, he’D do it, in the best interests of UA. A good deal, for the stockholders, should not be illegal, for UA.
Bye, Jeff.
Too bad. And good luck to Munoz with the union contracts. There are many under-employed workers out there that would like to have FA or pilot jobs with their salary and benefits.