Bloomberg news is reporting that American Airlines Group CEO, Doug Parker, has switched to a compensation plan that includes only stock. He will no longer receive a cash salary. According to the article,
“The change, effective immediately, reflects confidence in the growth opportunities at the world’s largest carrier, Parker said in a message to employees Wednesday. Of the stock grants he has been granted, 54 percent is tied to performance and 46 percent will vest over time, according to a corporate filing.”
A high proportion of most CEOs’ pay packages are tied to financial performance through stock grants of various flavors. I believe Doug Parker to be the first airline CEO to give up their cash salary and switch to being paid just in stock.
What Does This Mean?
It means Doug Parker is confident that American Airlines is likely to continue doing well for the foreseeable future. Historically, in the airline industry the foreseeable future would be about a week. I think it’s an interesting move for sure, and it speaks to a paradigm shift in financial thinking at airlines where management now runs the business with a focus beyond meeting next week’s payroll. It also raises the question – what ideas are likely to be experimented with to help ensure that AA’s stock price continues to do well? I continue to believe that American has gotten more right than wrong in the merger with US Airways, and have said so here. Touch these, and we’re going to have a problem!