American Airlines CEO Doug Parker is going to be just like one of his employees. Sort of. In a move that is rare for a CEO of a Fortune 500 company, Parker notified the SEC and his fellow employees that he asked the board of directors to terminate his employment agreement.
Parker says he will continue to serve as CEO. As a newly minted at-will employee, with no contract, and no predetermined severance package, he has very little protection.
“This was done at my request, because it didn’t seem right to me that I should be the only person at American with an employment contract,” Parker said in a letter to employees.“The contract protected me against a number of things that I don’t think I should be protected against—such as if I get fired or if unhappy shareholders gain control of the American board,” he added.
Kevin Kuschel, an executive compensation consultant says that forgoing the traditional contract is an unusual move.
“To voluntarily terminate an agreement in the middle of the agreement period, I’d say that’s pretty rare,” he said in an interview. Surrendering employment guarantees better aligns Parker with his employees, just as taking compensation only in stock united him with investors, Kuschel said.
Parker is trying to change the culture of American Airlines. Last year, he gave up cash compensation, joining the CEOs of KinderMorgan, Whole Foods and Fossil Group as the only Fortune 500 CEOs with cash compensation of $1 or less.
Don’t cry for Parker though, his compensation last year was more than $11 million, a seven percent decrease from the previous year. At his request, his compensation is in stocks and directly tied to the performance of the company and in 2015, American Airlines recorded record profits.
Parker took over American Airlines after its merger with US Airways in 2013 and has been trying to change the culture ever since. In March of this year, the pilots union went public with their complaint of a “toxic culture” at the airline. Last year, the flight attendants launched a public campaign for increased compensation and benefits using the tag line, “Do the right thing, Doug.”
Featured image, American Airlines
