Weekend Economists Sink the "Iron Lady" April 13-14, 2013

[Demeter]

57. Judge Rejects $20-Million Severance For American Airlines CEO

AND WELL SHOULD IT BE REJECTED!

http://www.npr.org/blogs/thetwo-way/2013/04/12/177020407/judge-rejects-20-million-severance-for-american-airlines-ceo?ft=1&f=1001

A severance package of $20 million might have seemed reasonable to American Airlines CEO Tom Horton, but a U.S. bankruptcy judge says it's too much.

The proposed payout, part of a deal that would merge American parent AMR and US Airways Group, first caught the attention of U.S. Trustee Tracy Hope Davis, a Department of Justice official monitoring AMR's Chapter 11 bankruptcy.

According to Reuters, she objected to the amount of the payment "relative to severance for non-management employees." On Thursday, U.S. Bankruptcy Judge Sean Lane said the payment also violates a 2005 federal code aimed at reining in excessive payments to executives of bankrupt firms, The Dallas Morning News reports.

Horton, who became CEO 16 months ago just as AMR was filing fopr bankruptcy protection, first joined the company in 1985, but also spent several of the intervening years at AT&T.

His package, agreed in February as part of the merger deal, would amount to $19.9 million divided equally between cash and stock. Under the agreement, Horton would step down as CEO of the new company and instead become non-executive chairman. Judge Lane had verbally approved the merger last month, but held off on a decision about Horton's severance.

Lane on Thursday rejected an argument by AMR that the severance provisions of the federal bankruptcy code would not apply because the payout would happen only after the merger and therefore would technically be paid by the new merged entity and not bankrupt AMR...

TWIST IN THE WIND, MFER!