Editorial: Pinnacle makes preemptive bid
Keeping talent on board: Giving hefty raises to executives of a financially strapped firm ensures that key leaders remain on board.

Staff Reports

Thursday, March 22, 2012

Giving raises to the top executives of a company struggling to stave off bankruptcy won't make a lot of sense to individuals who have undergone pay cuts or missed end-of-the-year bonuses because their companies didn't meet profit goals.

That is what Pinnacle Airlines Corp. has done in a sour economic climate that has left people wondering if corporate boards of directors are tone deaf to the nation's still-high unemployment rate and static payrolls.

Pinnacle has approved a sizable raise for Chief Executive Officer Sean Menke, raising his base pay $250,000 a year to $675,000. John Spanjers, chief operating officer and executive vice president, received a $125,000 raise, increasing his salary to $400,000.

The raises come after the company previously asked its unions to take 5 percent pay cuts and said nonunion employees also would have their pay cut.

Here's another way to look at the raises. Pinnacle is paying to stop a brain drain while the company is in the midst of a financial crisis.

The Memphis-based airline operates feeder flights for Delta, United and U.S. Airways. In December, the company launched an effort to shed costs, boost revenues and keep its planes flying without going into Chapter 11 bankruptcy reorganization.

The company explained the raises by saying the executives' workloads will increase dramatically when the company's chief financial officer Ted Christie departs March 30 to become CFO of another airline.

Pinnacle's other employees also will be working hard to keep Pinnacle's financial head above water. Pinnacle's leadership team would be remiss if they don't occasionally let employees know their efforts are appreciated.

A legitimate question would be: Why not base the executives' raises on their performance? If they can stabilize Pinnacle financially or, better still, make it profitable, then financial rewards make sense. That would be the ideal. In Pinnacle's situation, however, they have a proven entity in Menke, and they don't want to lose him in the middle of a restructuring.

Menke helped steer Frontier Airlines through bankruptcy. The experience he brings to Memphis from Frontier is what's needed now at Pinnacle.

Giving Menke and Spanjers raises now may leave a bad taste in the mouths of the public. But, in the big picture, they appear to be a small price to pay to keep two individuals on board who can save a company that's so important to Greater Memphis' economy.