United Airlines canceled Chief Executive Officer Oscar Munoz’s expected 2018 elevation to chairman and tied compensation more closely to customer service, after a passenger’s forcible removal from a flight sparked a public-relations disaster. Maintaining an independent chairman “is a means to ensure that Mr. Munoz is able to more exclusively focus on his role as chief executive officer,” United Continental Holdings Inc. said in a regulatory filing Friday. The carrier said it would link executive bonuses in part to “demonstrable progress toward improvements in the customer experience.”
The airline adopted the changes less than two weeks after passenger David Dao was dragged off a plane by security officers in Chicago. Dao suffered a concussion, broken nose and two lost teeth after he refused to give up his seat for a United crew member before the flight left for Louisville, Kentucky, his lawyer said. Munoz, who had been expected to add the chairman’s role at next year’s annual shareholders meeting, initiated the change, according to the filing. He already agreed last year to delay becoming chairman, after the board was revamped as part of a deal with two activist shareholders. The company named Robert Milton as chairman, and three incumbent directors decided not to stand for re-election. “The board also believes that an independent chairman of the board can effectively manage the relationship between the board and the chief executive officer,” the company said in the filing.
$18.7 Million Pay
United said bonus payouts would also be tied to “necessary cultural and process changes,” saying the adjustments were prompted by “recent events.” Until 2016, the airline used customer surveys as one tool in determining compensation. Last year it switched to a metric based on the rate of on-time arrivals. It’s too soon to say how the Chicago-based company will measure customer satisfaction in the future, said spokeswoman Megan McCarthy.
Munoz earned $18.7 million last year as he collected a multimillion-dollar signing award. The company granted him stock valued at $6.8 million to entice him to join the company in September 2015. The payout came well before the April 9 incident with Dao. Munoz said earlier this week that Dao’s treatment was a “humbling learning experience” for United and accepted full responsibility.
The CEO’s initial reaction drew scorn worldwide last week when he called the incident “upsetting” and apologized for having to “re-accommodate” the passengers who were asked to leave the plane. Hours later he told employees that Dao had been “disruptive and belligerent,” based on early reports. He finally appeared on ABC’s “Good Morning America” with a more contrite message and promised a full review of United’s policies regarding oversold flights.