Originally Posted by
Wheels up
...the 10s of millions of dollars of bonuses paid to airline executives regardless of their airlines profitability or performance.
Assuming this is true - would the hypothetical "most profitable airline" be one that is owned by the employees? In other words... if you took an airline private - say, the one you're describing with the overpaid execs, and eliminated (or distributed some smaller fraction of the aforementioned bonuses to the new employee/owners), would that airline compete more effectively against the publicly owned airlines who are staggering under the weight of overpaid management?
I would think if your answer is "yes" - you believe that the management decision-making would be of the same or better quality, and exec compensation costs would be lower, then we'd see a bunch of airlines where private equity firms (probably of the venture capital type) would back employee takeovers, or new startups. PE firms back ventures where they believe that the best possible management is in play. Since we don't see them investing in employee-run airlines, there's probably a valid economic reason it isn't happening...maybe the "overpaid execs" are actually providing some commensurate value?
What would happen if airlines adopted the Ben & Jerry's compensation philosophy, where the highest paid employee (CEO) can make no more than 7x the lowest paid employee? I can think of only two possible outcomes:
1) the airline would do great because morale would be high throughout, and the executive compensation would not drain away profits that could be reinvested in the company.
2) no good CEO would be attracted to running the company, because that rock star CEO could go to some other airline for 20x the lowest employee's salary. Airline goes into oblivion because of the poor management decisions made by a cut-rate CEO.
Are there other variations on this theme I'm not considering? I really believe that option #2 can be avoided by smart, hard working thoughtful people transforming themselves from "worker bees" into educated, professional management rather than waiting for good professional management to "happen".