CEO Gaffe of the Week: Pinnacle Airlines
 

"Menke the Monkey" getting the attention he deserves!

CEO Gaffe of the Week: Pinnacle Airlines (PNCL)

"This year, I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week I havea gaffe that I'm certain will be a contender for goof-up of the year in CEO Sean Menke of Pinnacle Airlines (Nasdaq: PNCL**) .

The dunce cap
For months now I've been pointing out what I deem to be absurd CEO pay packages. Two weeks ago I highlighted Citigroup's (NYSE: C**) Vikram Pandit for the dubious weekly honor after he boosted his annual pay by a cool 14,900,000% (to be fair, that's from a dollar), despite paying out billions in mortgage and foreclosure settlements and failing the Federal Reserve's stress test. Earlier this week I pointed out that while I am a Bank of America (NYSE: BAC**) shareholder, I don't have to agree with the sixfold pay increase that Brian Moynihan received in a year that his bank barely turned a profit.
Yet Menke's pay increase puts these two to shame. Even though a $675,000 annual salary may not sound like much, let me explain to you why this 60% increase in pay from $425,000 might be the dumbest thing I have ever seen.

Just five days before Menke got his raise, his company filed extension paperwork with the SEC notifying the commission that Pinnacle would be filing its quarterly report late. It's always odd when an 8-K indicating a pay increase for the CEO can be filed in a timely manner, but corporate results can't. But it couldn't possibly get any worse than this ... could it?

Oh, yes, it can! On April Fool's Day, no less, just 11 days following Menke's 8-K, Pinnacle filed for chapter 11 bankruptcy protection! That is not an April Fool's Day joke; the company seriously boosted its CEO pay by 60% after delaying its annual filing and declared bankruptcy only 11 days later.

To the corner Mr. Menke ...

But wait -- there's unfortunately more!

Pinnacle didn't break out the corporate pinata just for Menke, either. Pinnacle's vice president also got a 45% boost in his annual salary, as noted in that same 8-K on March 20.

What's truly unnerving about these pay increases is that the warning signs of a portending bankruptcy had been there all along. Pinnacle had been in the process of renegotiating its capacity purchase agreements with Delta Air Lines (NYSE: DAL**) and United Continental Holdings and had shed 11 of its 29 officer positions while eliminating 26 director-level positions. Even after taking these cost-saving measures and renegotiating some of its long-term debt, Pinnacle's $800 million in debt proved to be too much for the airline to handle.

Pinnacle's major shareholders weren't willing to sit back and relax while their stock continued to dive. In early March, two of its largest shareholders (which owned a combined 6.2% of outstanding shares) sent a letter to Pinnacle's board of directors requesting that at least two stockholders be placed on the board. Their contention was that Pinnacle's upper management was severely out of touch with shareholders, since directors had purchased almost no shares of the company on the open market since 2007 and that $173 million had been invested in nonperforming assets over that time span. Would it honestly surprise anyone that Pinnacle's board denied their request?

For the icing on the cake, the company's CFO abandoned ship on March 5 to become Spirit Airlines' (Nasdaq: SAVE**) new CFO.
Ladies and gentlemen, we have a clear contender for Gaffe of the year"

Cue F9 guys defending Menke in 3...2...1...

This is awful! When will we require our congressmen to pass laws to end this gross abuse. This reminds me of stories my parents used to tell me about, during the rise of unions, because corps would do things like this. Or they would work you until six months before retiring then fire you, or somehow wipe out your pensions. Oh.. woops...

For all those at PNCL, especially at Cologan, my sympathies.

Great piece of writing, loved it. If only I wasn't in this nightmare called 9E.

That's awesome, made my night

Even funnier is that not only will people continue to work there, but others will continue join in while the operation is sucked dry.

Sad, but true.

Airlinii Pilotus will always find a rationale for running towards shiny metal or refusal to free themselves from their abusers. I can't fathom actually flying an airplane for these people. Existing like that is simply beyond my comprehension.

In this economy you just expect people to quit overnight?
You can talk all you want on a safe message board but in the real world there are bills that have to be paid. People can't just quit their jobs because it sounds like it might be the right thing to do.

Says the pilot employed by AMR. Guess you never denied being of the same breed though

haha he is getting the praise he deserves....if there is one thing i seen at this company - it is that the people in MGMT, really do find themselves in hot water (pay, fatigue issues) or in the negative spotlight (3407, training) often and harshly....to my pleasure.

Both the present Eagle and AA are a far cry from this company and how it treats its pilots. Sure, AMR's management ethics in regard to personal compensation and their business prowess is equally weak, but in talking to pilots at this carrier, I can confidently say I wouldn't be one of their employees.

Now what happens in the future is a different story. I can assure you if AA sinks to anywhere near this level then I'll put my keyboard where my sneakers are and walk elsewhere.

Yet, they keep getting richer and pilots keep getting abused and poorer for it. My bet says they're at home relaxing by their BBQ's with a cold drink laughing louder then you are on your 3rd JM/RA or swatting misquitos in a fleabag hotel on your 8.5 hour layover. They're considering their next lucrative financial move, while pilots consider how to pay the mortgage (if they can afford one).

Of course, their job is easier when they make in one month what many pilots slaving for them make in one year. You're fooling yourself if you think it will change anytime soon.

Sad thing is you are absolutely right! How long will the middle class put up with this?

That's my point. WE as a profession seem WILLING to put up with this, so what message do you think that sends to these scumbags ?

Yep............that we're saps and are willing to take it and in fact, even when we know about it before hand to eagerly line up to get our fair share of abuse. :cool:

Never underestimate the powerful intoxication of a shiny jet. You'd think we were back in the flower-power days of '67 flying on owsley's acid. :rolleyes:

There are enough laws on the books. We want a law passed because the American people (includes me too) are too lazy to do research on their own and then vote with their feet or pocket book. Not only that, the info that we do find in our research, if we do research, may not be accurate. Between companies using the loop holes in the law and the media distorting the facts or delaying the facts we may or may not be able to sift out the truth within the piles of BS. Let's not forget that the very same congressmen that pass these laws are crooks too. Kind of like the fox guarding the hen house. Other than that I agree with everything else in the post.

Its called invested senority. Which at pinnacle essentially means jack. Every one preaches to just quit. Well the majors arent hiring right now and I'd venture a guess that anyone with more than 6 years senority at this party isn't willing to take a 30 dollar pay cut to plug up another shady regional senority list. Just quit? Tell that to my two kids. I categorize that with the union constantly telling me to accept it and move on. And we wonder why pilots drink like fish and go through marriages like underwear. There is no support at this level, not from mgmt or our union. Answer me this... if Menke throws out our contract do yoh think its right that we have to keep paying dues? Cause we will...

So you'll be leaving your current job after being shorted $100 on your next paycheck? Or will you leave once your management team takes a 100K pay raise? Or are you going to leave when you have a week of vacation taken away in BK? I think "a far cry" is a bit of an exaggeration - take a step back and make an honest assessment of what the future holds for you. Your future is not much different than the future of many 9E pilots. Where are you going to go once you leave?

gotta love the anonymous "my regional rocks and yours sucks" clueless chest thumpers...:roll eyes: it's about as stupid as me telling you and everyone else to man up and don't go to work in support of Pinnacle pilots.


yeah genius we are all gonna quit to take an 18K job as FO at one of the few regionals that is actively hiring...

Right, so with no accountability for the schools that don't tell people how it is, not accountability for the lenders that lend out to the SJSers, we somehow expect people to magically understand how the industry works before they make these decisions, and then just call them idiots when they get here and realize that it isn't all that they were led to believe? I'm all for responsiblity, but it's not fair to take on this attitude when people don't have the information to make balanced decisions, and at some point there should be some accountability, not after it's "too late".

so all of the non web board sources (few web boards when i started and I really didn't use them) that told me that everything was going to go a certain way over period of time and cost a certain amount were wrong. Their story jived with all of the other sources that I checked from other venders. I was not used to living in a world of lies and deception. From start to finish, aviation is a den of thieves and liars.

+1.................

In a few years, it's going to mean jack at just about all the regionals. Is United going to conitnue to pay higher rates for their contract flying after Delta and American have beaten their feed into submission? You don't want a paycut? Too bad, we'll file bankruptcy and give the planes to someone who'll fly it for less. But stick with it, that hiring boom is JUUUUUUUUUUUUUUUUUUUST around the corner!