April 30, 1999
ALPA, Intl
Committees
The 61-year-old executive, who joined the airline during its
Chapter 11 bankruptcy reorganization in 1992, received stock grants and options worth
millions of dollars in his new contract.
The contract, which was finalized in March and extends his employment through December
2000 with automatic one-year extensions, gave Franke 113,000 shares of restricted stock
and options to purchase 350,000 shares. The specifics are spelled out in the
company’s proxy statement, which was filed with securities regulators this week.
The stock awards beef up his already sizable stake in the airline, and underscore his
longtime emphasis on tying his pay largely to the company’s performance on Wall
Street. Franke’s new salary, for example, is a relatively modest (by corporate
standards) $200,000 a year, and he doesn’t participate in America West’s annual
bonus or incentive programs.
The strategy has paid off big time this year, as America West’s stock has finally
made a big move, climbing from $12 to $30 a share. At the end of the year, Franke owned
886,434 shares, or 2 percent of America West’s Class B shares. At $30 a share, the
holdings are worth more than $26 million. And that excludes this year’s stock awards
and other options that he can’t yet exercise. Of the new awards, the restricted stock
is a grant, meaning Franke doesn’t have to buy it, as he does when exercising stock
options.
The grant was made April 17, when America West’s stock closed at $30 a share,
making the pot worth $3.39 million. Franke loses the shares if he leaves America West,
though that provision lapses over time. With the new grant, Franke has received a total of
387,334 shares of restricted stock.
The latest options give Franke the right to buy 350,000 shares at $24.19, the closing
price the day they were granted. With the stock around $30 a share, Franke has a paper
profit of about $2 million, though he’s not yet eligible to cash in. Since he joined
America West, Franke has received options to purchase nearly 1.1 million shares of stock,
according to the proxy.
The new contract calls for him to get an additional 150,000 in options in January. It
also provides:
- A base salary of $200,000 a year, which may be increased by the board at any time.
- A $2 million term life insurance policy.
- A $1.5 million serverance payment if the contract is terminated for certain unspecificed
reasons. - Loans to pay federal and state income taxes triggered by the stock awards. As of Feb.
28, Franke had $1.6 million in outstanding loans to America West under this provision.
The proxy statement also details Franke’s pay package from 1997. Last year, his
salary was $375,000, down from $500,000 in 1996. Franke’s pay was cut because
he’s no longer chief executive officer of the airline. Richard Goodmanson assumed
that title early last year. Franke is chairman of the airline and chairman and chief
executive officer of its holding company, America West Holdings Corp.
Franke didn’t receive any stock awards last year. His only other compensation was
$103,892 for such perks as insurance premiums, an automobile allowance, professional fees
and 401(k) contributions.
Goodmanson’s salary was $500,000 and he received a bonus of $75,000. His
“other” compensation totaled $233,951, much of it for moving expenses.
Goodmanson joined America West in June 1996.
The board recently bumped his annual salary to $520,000 and gave him options to
purchase 110,000 shares.
The International Brotherhood of Teamsters thinks Franke has too much power at America
West because he holds the chairman and CEO titles. The union, which is negotiating a
contract for America West’s mechanics and is involved in litigation with the company,
is asking shareholders to approve a proposal to require that an independent, outside
director serve as chairman of the board in the future. That would likely make the board
more critical of management’s plans, it says.
In the proxy statement, America West urges shareholders to vote no on the proposal. It
notes that all but two of its board members work outside the company and says the proposal
is an attack on Franke. It calls the Teamsters’ proposal “a misguided effort
arising from questionable motives to fix something that not only is not broken, but is in
fact working very favorably for stockholders, as evidenced by the company’s financial
performance in 1997.”
| AmWest Chairman Gets Stock Worth Millions by Dawn Gilbertson, The Arizona Republic |
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| America West Airlines Chairman Bill Franke got more than a steady paycheck when he signed on with the company for two more years. |