Bankruptcy Judge Sean Lane has disallowed the $20 million kiss for American Airlines CEO Tom Horton.  Horton was to receive roughly half in cash, half in stock as severance upon his departure from the new company (to be called American Airlines Group) formed after the merger.  His departure was scheduled for the first annual meeting to be held after the merger which most believed would be in May as has been tradition for American Airlines.

I vociferously disagreed with this severance payment.  So did a US bankruptcy trustee who argued that it violated federal governing such things in bankruptcies.  After review, Judge Lane offered that the idea that this was taking place post bankruptcy and therefore not entirely within purview of the court was a legal fiction.  I couldn’t agree more.

When you get a severance of that size, it should be for accomplishing something.  Based upon all that has come to light so far on the journey of both US Airways and American Airlines, Tom Horton didn’t have much to do with the success of this agreement.  In fact, if anyone really had much to do with getting the company into alignment with markets, it was Beverly Goulet, AA’s Chief Restructuring Officer.

Horton sought to delay, obfuscate and sabotage the merger at most every point.  He has made public arguments that he’s the superior CEO to Doug Parker in semi-veiled statements made to the press.  The problem with that is there is actually no evidence of what value Tom Horton has brought to the process in approximately 16 months.

Is it the atrocious livery that has been perpetrated on those aircraft?

Judge Lane has pointed out that when the new company is formed and has exited from bankruptcy, the new Board of Directors can vote on this severance.

I have long felt the current American Airlines Board of Directors has not governed the airline well for many years.  Like so many boards recently, it has seemingly given blanket endorsements to the CEOs without regard to assessing what leadership of the company has achieved and without determining if the course set by the leadership is a sound one.

But, man, they sure can vote bonuses well.

$20 million is too much for Tom Horton and what he brought to the table.  But if everyone truly thinks it is necessary, then I would suggest that the new Board vote on it and give it to him.

I would point out that Horton not only isn’t needed to make this new airline work, he’s not wanted.  This deal doesn’t need him.

Filed under: Mergers and Bankruptcy by ajax