United CEO May Have Made Millions By Returning Early From Heart Transplant

Image courtesy of (Adam Fagen)

United Airlines CEO Oscar Munoz returns to work on Monday only two months after a heart transplant. Was the airline exec’s speedy recovery spurred by a desire to get back to business, or did Munoz return earlier than planned because it was the only way to earn his full bonus?

United announced last week that Munoz would return to the helm on Monday, weeks before his previously anticipated return date of the end of the first quarter.

Los Angeles Times columnist David Lazarus uncovered a regulatory filing from the airline, made just a day after Munoz’s January heart transplant, that details an extensive list of what the airline head could get if he returned to work sooner rather than later. Spoiler alert: it’s a lot of money.

According to the filing [PDF], the employment agreement between United and Munoz was signed on Dec. 31, just a week before his heart transplant, but two months after he suffered a major heart attack that took him away from his corporate duties.

Under the agreement, Munoz would received a bonus of $10.5 million if he put in six straight months of work. If he works for a full year, he’ll receive a base salary of $1.25 million and a signing bonus of $5.2 million. He would also become eligible for an annual performance bonus of at least $3.75 million.

All of these incentives and salary marks began with the start of the 2016 calendar year. And with three months already passed, that gives Munoz just nine months to meet the stringent requirements.

For example, the $10.5 million six-month employment bonus stipulates that Munoz is not eligible for the bonus until “such date as he has been in continuous active service as President and Chief Executive Officer for a period of six months.”

Kevin Murphy, an executive-compensation expert at USC’s Marshall School of Business who reviewed the filing, tells Lazarus that the airline clearly knew what it was doing with the employment agreement.

“That six-month thing is clearly giving Munoz a strong incentive to be back at the firm,” he said. “If he doesn’t work six straight months, he doesn’t get the money. United is saying here that if he returns to work quickly, he gets rich. If he doesn’t, he gets relatively little.”

In addition to incentivizing Munoz expedited return to the airline, the agreement also warns of what could happen if the CEO doesn’t return soon.

Munoz’s employment can be terminated due to disability if he is “incapacitated for a period of at least 180 days by accident, sickness or other circumstance that renders [Munoz] mentally or physically incapable of performing the material duties as President and Chief Executive Officer.”

While Munoz has been out of the office since October recovering from a heart attack and then heart transplant, he’s only been absent for less than three months of 2016. That would mean if the agreement’s 180 days started Jan. 1, he still would have several weeks before he faced termination due to disability.

It’s not unheard of for relatively healthy people to recover from major surgery quickly, according to cardiologists who spoke with the Tribune’s Lazarus. But that doesn’t mean they should jump back into the hot seat of a major airline that’s been fighting to improve its image.

“Two months is very fast,” said Dr. Morton Kern, a cardiologist at UC Irvine and the Long Beach Veterans Affairs Medical Center. “If I was a heart-transplant patient, I’d wait six months, a year, before going back to work.”

Munoz, who quickly began trying to repair United’s relationship with employees and passengers after taking over when former CEO Jeff Smisek abruptly stepped down, has a lot on his plate when he heads back to the office. The New York Times reported last week rumblings began to surface that some United shareholders were ready to shake the board up, tasking former Continental CEO Gordon Bethune as chairman to oversee Munoz’s performance.

Two months after a heart transplant, airline wants him back at work — or else [The Chicago Tribune]

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