« American and US Airways create an "Integration Management Office" | Main | FAA announces 149 airport tower closures including two Dallas towers »

March 22, 2013

American says CEO's $20 million payment is allowable, refutes bankruptcy trustee's objection

In a filing made in bankruptcy court on Friday, American Airlines said the severance package of $19.8 million for its chief executive Tom Horton is legal, refuting the objection of the U.S. bankruptcy trustee.

The trustee had filed an objection last week to Horton's employment agreement that is part of the proposed merger with US Airways. Horton is slated to become chairman of the newly combined company and receive a severance of cash and stock when the merger closes.

"The Employee Arrangements are on market terms, are carefully designed to incentivize employees to remain focused on consummating the Merger, and will allow the Debtors to maximize the value of the Merger for the benefit of their stakeholders. Accordingly, the relief requested in the Motion, including the Employee Arrangements, should be approved and authorized," American's parent company, AMR Corp. said in the filing.

AMR also mentioned that of the 300,000 parties that were notified about the company's merger agreement, only 25 responses were filed. Of those, there was only one objection, made by the U.S. Bankruptcy Trustee as it pertained to the employment compensation agreements that are part of the merger agreement.

"Importantly, no party that has filed a response has challenged (nor could it) the Debtors’ business
judgment in entering into the Merger Agreement or that the Merger clearly is in the best interest
of the Debtors’ estates," the filing said.

The trustee has argued that the Horton's severance payment "defeats Congress' intent" when it placed restrictions on executive compensation. Those restrictions in the U.S. Bankruptcy Code limit payments to current employees to not more than 10 times the average of similar payments to nonmanagement employees, except in special circumstances.

AMR says the bankruptcy code does not apply in this situation because AMR is not making the payment to Horton, the newly formed company, will be making the payment after the merger closes and AMR has emerged from bankruptcy.

A hearing is scheduled on March 27 where U.S. bankruptcy judge Sean Lane will hear arguments related to AMR's motion to merge with US Airways.

-Andrea Ahles

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c2cc953ef017d42335ed2970c

Listed below are links to weblogs that reference American says CEO's $20 million payment is allowable, refutes bankruptcy trustee's objection:

Comments

whitry

I don,t care what some stupid Texan lawyer says. Horton is not entitled to the 19 million in bonuses. Horton along with arpey and the rest of aa,s board of directors should be thrown in prison for the rest of his natural born life. and when I mean prison, not federal prison but hard labor prison!the day is coming and very soon for these crooks and their families to all go to jail!

CeoCrookWannaBe

"And they call it legal".......The stooges of the majority work force champion for us.

RL

Just give the schmuck his money and be done with him.

forlorn hope

Now that a legal challenge has been introduced, it seems
to me that he should defend his illegal "gift" using his own money and his own personal attorney. What gives this man, or any corporate thug the right to utilize corporate attorneys for private gain. All these shills, from corporate lawyers to corporate CEO's steal from the company and their employees when they take revenue and use it to pay for their own personal gains.

whitey

YOU ARE RIGHT ON THE MONEY FORLORN HOPE.THEY TAKE REVENUE TO PAY FOR GAINS AND THEIR FAMILIES. AS FAR AS I,M CONCERNED THEIR FAMILIES SHOULD BE THROWN IN HARD LABOR PRISON ALSO. THEY ARE JUST AS GUILTY!

Post a comment

Comments are moderated, and will not appear on this weblog until the author has approved them.

If you have a TypeKey or TypePad account, please Sign In.