Fair is fair -- but pensions for executives often aren't

Does your job guarantee you a pension for your retirement? Mine doesn't, and if you're like most private-sector workers, your pension plan is either crumbling around you or has been replaced with a 401(k) program, which may or may not receive a helping hand from your employer.

Yet many if not most chief executives continue to enjoy lavish pension plans -- on top of their multimillion-dollar pay packages and sundry other perks.

How can that be fair?

The short answer, of course, is that it isn't. But fairness was never the point. This is about giving CEOs what they want, regardless of what's given to other company employees.

"It's what the market is for these jobs," said Charles Tharp, executive vice president of policy for the Center on Executive Compensation, athink tank that was introduced this month to provide "a cohesive and reasoned corporate point of view" on executive pay.

The center's funding comes from the HR Policy Assn., an organization of human resource executives at more than 250 companies, as well as individual corporations such as McDonald's Corp., Lockheed Martin Corp., IBM Corp. and General Mills Inc.

"If you're going to hire someone at that level, and that person has a pension, you have to match that pension," Tharp said. "You've got to pay what the market is."

By that reasoning, United Airlines was justified in giving Glenn Tilton a $4.5-million pension trust when he took over the ailing carrier in 2002. The money, United said at the time, was intended to compensate Tilton for the pension he was abandoning when he departed his former employer, then ChevronTexaco Corp.

Losing his pension was clearly an important point for Tilton. Otherwise, the $4.5-million trust wouldn't have been included in his contract, which also featured a starting salary of $950,000, a $3-million signing bonus and 100,000 shares in United's parent company, UAL Corp.

Just three months after he was hired, Tilton led United into Chapter 11 bankruptcy proceedings.

In 2005, he terminated United's four employee pension plans, covering about 120,000 active and retired workers. It was the largest pension default in U.S. history, dumping about $5 billion in obligations on the government-run Pension Benefit Guaranty Corp.

In 2006, when United emerged from bankruptcy, Tilton's total compensation was valued at almost $24 million.

Last year, his pay package was a considerably more modest $1.4 million.

Megan McCarthy, a United spokeswoman, said the company's employees now have either 401(k) plans or union-run pensions.

Tilton, she said, is not receiving a pension. "He has a certain amount that was awarded when he came to United."

Damon Silvers, associate general counsel of the AFL-CIO labor union, which includes many United employees, called this a laughable distinction.

"If Tilton is getting a fixed benefit from a trust, that's a pension," he said. "Call it what you want. It's a pension.

"It's not a bad thing necessarily that a CEO has a pension," Silvers added. "But why should he be the only one?"

The answer is that CEO pay all too often is based not on performance but on a series of fuzzily defined criteria that can best be summed up like this: If that guy gets it, so do I.

In other words, the fat compensation packages -- including pension deals -- enjoyed by other CEOs help shape new compensation packages, which in turn influence subsequent compensation packages.