VideoAnd they were so close to landing this thing.
Just when it seemed like American Airlines had found a way to avert bankruptcy, union leaders over the weekend threatened to nix critical wage concessions granted a few days earlier.
The reason for the reversal? According to published reports, the unions found out about the executive perks of American's top executives -- perks the unions say were kept secret during contract negotiation.
The labor unions had agreed to $1.8 billion in pay and benefit cuts to avert a bankruptcy filing. But a day after agreeing to the give-backs, American filed its annual report with the Securities and Exchange Commission. On Friday, leaders of unions representing the airline's ground workers and mechanics threatened not to sign the agreements. On Saturday, Reuters reported that the flight attendants union called for a new vote, contending that the executive-perks revelation put the deal in a whole new light.
The annual report revealed that American funded a supplemental pension trust for its top 45 employees that would protect a portion of their retirement income if the airline were forced to file Chapter 11. In addition, the airline offered its top six executives bonuses of twice their base salaries as incentive to stay with the airline through January 2005.
Not surprisingly, American's labor leaders were outraged at the information. "We have signed no new agreement, and in light of the disclosure of American Airlines' SEC filing, we must reconsider whether we will sign off, even if the consequence is bankruptcy," James C. Little, a director of the Transport Workers Union, which represents mechanics and ground workers, said in a memo to members.
According to the Washington Post, American spokesman Bruce Hicks said no union officials have told American they were backing out of the deals. "If they did, that would be tragic," Hicks told the newspapers.
But John Darrah, president of the Allied Pilots Association, told the Post that his members were "justifiably irate" with the perks and that "every employee on the property should question management's motives and judgments."
Flight attendants were equally upset with the revelation. Said John Ward, president of the flight attendants union: "The only responsible course of action for the company to take at this time, if it has any sense of decency and any hope of restoring any level of trust from flight attendants, is for this money grab to be rescinded immediately."
Ward also questioned the timing of American's SEC filing, noting that American had asked for an extension during negotiations with unions. "Knowledge of this outrage would probably have doomed any agreement, and rightly so," he said.
American's Hicks denied the accusation, however, telling the Post it filed late simply because the company didn't know whether or not it would file for bankruptcy.
He added that chairman and chief executive Donald J. Carty took an 88-percent cut in total compensation in 2001, and that he agreed to cut his salary this year by 33 percent.
Meanwhile, though the flight attendants union asked for a revote, other unions are hesitant, fearing a knee-jerk reaction to the revelation. In fact the president of the pilots' union said he was caught off guard by the flight attendants' decision.
"I think if you took a revote right now, it would be an emotional vote and not an intellectual vote," Darrah, told the Associated Press.
Baruch College Accounting Professor Named PCAOB Chief Auditor
Apparently, every watchdog has its day.
Take Douglas Carmichael, the accounting scholar known for his harsh criticism of the accounting industry's lax standards. Late last week, Carmichael was named chief auditor of the Public Company Accounting Oversight Board.
Carmichael, currently director of Baruch College's Center for Intergrity in Financial Reporting, told Bloomberg he viewed the job as a chance to address shortcomings in the accounting field.
"I've seen things happen in the auditing profession that have disturbed me, that I thought went in the wrong direction," he told the news service, "and the chance to put things in the right direction was the appeal of the job."
After a slow start (including the initial selection -- and subsequent resignation -- of William Webster as chief), the PCAOB seems to be off and running. Last week's selection of William J. McDonough as chairman was met with almost universal praise.. And as CFO.com reported earlier, the PCAOB has hit the ground running, with plans to write new audit-firm rules, collect fees from public companies for funding, and revisit the issue of banning auditors from doing tax work for clients.
EU Fights Back on Registration Requirements
One sure sign the PCAOB is in full gear: regulators in other countries are already mad at it.
The European Union promised to fight back if the U.S. requires European accountancies to register with the new U.S. accounting watchdog, reports AccountingWeb. In an April 14 letter to SEC chief William Donaldson, EU financial services commissioner Frits Bolkestein said if the PCAOB goes ahead with the proposed rule, the EU would require U.S. companies to register with all 15 EU member nations.
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