Unlike Most Pay-Cutting CEOs, Delta's Won't Be Rewarded for Saving the Airline

Not only did he forgo part of a comparatively low salary while leading Delta through its Chapter 11 case, Grinstein will get none of the usual payouts. No stock. No cash bonus. Nada.


Who walks away from millions of dollars?

Bosses of some giant companies do, it turns out.

While CEOs are regularly lambasted for accepting big pay packages, it isn't unusual for corporate titans to swallow short-term pay cuts, skip bonuses or temporarily opt for $1 salaries --- although it is often for the promise of long-term rewards. It happens at companies that are soaring as well as at those where employees need to be convinced that top leaders are sharing the burdens of hard times.

Now, Delta Air Lines' 74-year-old CEO Gerald Grinstein has taken the concept a step further. Not only did he forgo part of a comparatively low salary while leading Delta through its Chapter 11 case, but this week the company announced that Grinstein will get none of the usual payouts that typically go to CEOs after such cases. No stock in the reorganized company. No cash bonus. Nada.

"I like it," said Tim Pollock, an associate professor of management at Penn State University, who studies executive compensation. "Our own low expectations about CEO self-interest make the gesture that much more powerful."

Usually, said Don Lindner, an executive compensation expert with human resources association WorldatWork, CEOs "are sacrificing now because they want the company to turn around, and then if it works out they can profit."

Pat McGurn describes the practice as "trading dimes for dollars."

McGurn is executive vice president of Institutional Shareholder Services, which provides research and voting advice for shareholders. He used to keep a file with information about all the CEOs taking what looked like pay cuts, but it grew too big.

He cites Terry Semel. The Yahoo chief's salary dropped to $1 last year, but over time he has received options to buy millions of shares in the company.

"They get their pot of gold at the end of the rainbow, not at the beginning," McGurn said. "They are more than willing to trade off short-term income in order to receive a longer-term share of the pie. That ends up being a hell of a lot more than the salary would have been."

Sometimes, superwealthy bosses volunteer for less pay even when times are good, McGurn said. Those "share-the-wealth" moves include the $1 salaries of Google's co-founders, who became billionaires from their stock in the business and will make even more if the company continues to thrive.

McGurn said he also sees examples of "share the pain" cuts --- such as those by GM chief Rick Wagoner --- where corporate leaders accept pay reductions to take part in the sacrifices at their troubled companies.

Sometimes short-term moves can backfire. Grinstein's predecessor at Delta, Leo Mullin, gave up nearly $200,000 of his $795,000 salary and took no bonus for 2001 in the wake of the Sept. 11 attacks. But two years later, he stepped down amid lingering controversy after it was disclosed that Delta had given top executives big bonuses in 2002 and spent millions on special bankruptcy-proof pension trusts for them. He got $16 million when he left.

Series of pay cuts

Grinstein started as CEO with less pay than his predecessor. And it went down from there.

Like employees at all levels of Delta, his salary was chopped during the more than three years he has been CEO. His $338,000 salary is among the lowest for chief executives of major U.S. corporations. Meanwhile, the value of Delta stock he had accumulated evaporated, just as it has for everyone who held common stock when the airline filed for bankruptcy protection.

Now, he is refusing to take any extra cash, stock awards, stock options or salary raise as part of what may the greatest success of his long career in business: Delta's pending exit from bankruptcy protection.

His top two lieutenants --- both of whom already make a bigger salary than Grinstein --- are each in line to receive $8.4 million in equity awards over the next few years if goals are met, plus another $765,000 in possible cash incentives, according to Delta.

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