Oscar Munoz is leaving his CEO position not only with high accolades, but a higher salary. Meanwhile, incoming CEO Scott Kirby has a very big incentive to push United’s stock price higher.
Late yesterday afternoon, United made a pair of filings with United States Securities and Exchange Commission, as required by law. This so-called Form 4 must be filed whenever there is a material change in the holdings of company insiders. The filing details the compensation structure for Munoz and partially for Kirby.
Oscar Munoz’s Compensation Package + Future At United
Munoz will not be sticking around long-term at United in a front-line capacity. In May 2020, he’ll become Executive Chairman and collect $2 million in annual salary. That’s $750,000 more than his current base salary, but does not include performance bonuses that totaled $3.8 million last year. However, Munoz may be eligible for a “long-term incentive grant” worth more than $10 million.
His full-time role Executive Chairman will include:
“providing support for strategic initiatives, particularly those relating to customers, employee experience and labor relations, social responsibility and community impact; and maintaining, fostering and transitioning relationships with business and industry boards and organizations, customers, employees, investors, regulators and other government entities.”
That role will only last for one year. From May 2021 through March 2022, Munoz will take on an undisclosed ‘non-officer employee” role requiring less than 40 hours per month at a base salary of $360,000.
The news here is that Munoz is on his way out of a day-to-day role at United.
Scott Kirby’s Compensation Package
Kirby’s base salary and targets for performance bonuses were not disclosed.
But United did disclose that he was awarded potentially-lucrative stock options. Kirby was given 306,865 shares at a price of $110.21 each. United closed at $88.58 on the Nasdaq exchange on Friday and is essentially unchanged from a year ago, though it has ranged from $77.02 to $96.03. With a P/E ratio of only 8.20, United looks quite undervalued to me…
Thus, part of Kirby’s reward will be conditioned up on how much stock prices go up under his tenure.
It is also likely that Kirby will be sticking around for quite some time, as these stock options do not begin to vest until 2023 and are staggered until 2028. The majority will vest in 2024, 2025 and 2026.
CONCLUSION
A couple takeaways. First, Munoz will be drastically winding down his time at United in 2021. Second, Kirby will have a huge incentive to encourage investors to raise stock prices. Since options do not begin to vest until 2023, hopefully Kirby’s vision and United’s customer service will help to raise stock prices, not just short-term moves to satisfy Wall Street.
You can read the filings here and here if you’re curious.
The CEO’s office is oversold by one. Here’s a pile of cash 🙂
Two million for Oscar, even if it is only for one year? I’m impressed. That’s a lot of sand.
“With a P/E ratio of only 8.20, United looks quite undervalued to me…”
Why? While not close to dispositive, since you flag price to current earnings UAL is currently trading at a slightly higher multiple than Delta.