United Airlines

In a few weeks, United will likely be sending out its proxy statement. Last year it was issued on April 21. But the events of the week inspired me to take a quick look at last year’s statement. A quick search of the proxy statement filed last year shows that the word “executive” appears 421 times and the word “customer” appears 29 times. The only director whose biography lists customer service is that of CEO Oscar Munoz. More than once, the proxy statement lists responsibilities Munoz had at CSX including “service design, customer service, engineering, mechanical,  and technology.” However, customer service at a freight company is entirely different from customer service at an airline.

As many companies do, United also notes particular expertise of its board members. Here are some excerpts:

Director Caroline Corvi “brings an expertise with respect to the manufacturing of commercial aircraft.”

James Kennedy “brings to the Board a stockholders' perspective and his expertise in management and finance, particularly as result of his tenure as President and Chief Executive Officer of T. Rowe Price.”

William Nuti “provides the Board with valuable expertise in management, finance and technology, developed during his years of service in the technology industry.”

Laurence Simmons “provides the Board his extensive expertise in finance, corporate strategic transactions and the energy industry. Mr. Simmons is the founder and Chairman of SCF Partners ("SCF"), a firm providing equity capital and strategic growth assistance to build energy service and equipment companies.”

Notice anything missing? The board on the whole seems somewhat tilted toward industry and technology expertise.

To its credit, United has used Customer service as one of the operational metric for determining executive compensation. In 2015, the company reported last year, “customer satisfaction survey results exceeded the target level with respect to the customer satisfaction component of the 2015 Annual Incentive Program awards (representing 20% of the total target opportunity). For 2015, customer satisfaction was measured by monthly improvement over the prior three-month rolling average customer satisfaction survey scores.”

A fundamental question for pay for performance is what the threshold level is set at. As far as I could tell that isn’t disclosed in the proxy statement. It leaves open the question: if something improves from truly dreadful to only dreadful, is it worthy of reward? Clear disclosure is more helpful. Delta’s proxy statement for example, notes its “continued our 1st place performance in fewest Department of Transportation customer complaints among the major network carriers.”

While targets were met on customer satisfaction in 2015, Munoz did not receive a bonus as he had only recently joined the company. Again, we can expect to see the new proxy statement in a few weeks. It will attract a great deal of interest.