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Thursday, February 1, 2007
Delta stays my Delta
The Atlanta Journal-Constitution
Toward the end of Wednesday’s State Senate debate on vouchers for special education students, Lt. Gov. Casey Cagle interrupted the proceedings to announce the breaking news: US Airways had dropped its hostile takeover bid for Delta Air Lines. The chamber erupted in cheers. Later in the afternoon, at a joint Transportation Committee meeting, most legislators were sporting “Keep Delta My Delta” buttons.
Without question, yesterday was a great day for Atlanta and for Delta’s employees. Books undoubtedly will be written about how the airline survived bankruptcy and takeover, but nobody can look back at the bullets it dodged without acknowledging the leadership of Delta CEO Gerald Grinstein and his management team. I thought it was brilliant. Management and employees sent all the right signals, telling creditors with their actions — recalling workers, planning new hires and announcing the purchase of new planes — that Delta management had it under control. All of their signals reassured creditors. To be honest, I thought Delta was a goner when US Airways bumped up its takeover offer by 20 percent.
Delta’s happy day prompts two observations. One concerns executive pay. The other is the role of government in promoting, blocking or taking sides in mergers.
President Bush, speaking Wednesday in New York on the “state of the economy” warned corporate boards to “step up to their responsibilities” to tie executive compensation to performance. “Government should not decide the compensation for America’s corporate executives,” said Bush. “But the salaries and bonuses of CEOs should be based on their companies and bringing values to their shareholders.” New federal rules to give investors more and clearer information on executive compensation and perks took effect last month.
No question some compensation packages, like that for former Home Depot chief Bob Nardelli, who was paid an average of $25.7 million a year, are obscene. But I agree with Bush. It’s not government’s role to write a formula or to set a number as a compensation ceiling. To my mind, Delta’s Grinstein and other executives have earned big bonuses in saving Delta. I don’t have a number in mind, but their work is clearly deserving of generous compensation. As with campaign finance, clear and timely disclosure is all I ask.
As for government’s role in mergers: It should be neutral, of course, determining that mergers don’t create monopolies and aren’t significantly anti-competitive. Otherwise, it’s a bystander. Using public money, either through tax incentives or exemptions, to influence the outcome is generally undesirable, though I don’t fault company officials for attempting to use government to send signals to the suitor that Georgia prefers the hometown gal.
It is, in any event, a super day for Delta and for the home team. Congratulations to managment and to employees for pulling this one off.
