For The Masters month, I had planned to give you an update of The Augusta National controversy, but Martha Burk's quest has been all but forgotten in the wake of the nation's almost singular focus on the far more important conflict in Iraq. Sorry Martha, but nobody really seems to care about the Augusta mess anymore. So, I think I will devote this Advisor to something more related to the world of business…sounding off about the top executives at Delta getting million dollar bonuses while losing billions of dollars for their shareholders

As I write this article, I refer to the March 28 Atlanta Journal-Constitution article which states that Delta Chairman Leo Mullin received a bonus of $1.4 million for 2002, during which the airline lost almost $1.3 Billion. Of course, he also received his full base salary of $795,000. The top five Delta officers received bonuses totaling $4.8 million in addition to another $12.5 million in bonuses to 55 lower-tier executives. As if all of that was not enough, Delta also spent over $25 million setting up special accounts to protect certain executives' pensions in the event of bankruptcy.

Maybe I am missing something here, but all of the above sounds ridiculously absurd to me. The article said that Delta defended the hefty bonuses by saying “Our executives are compensated at about 50% of their peer group.” After reading that statement, I decided to do a little research. Going directly to my research buddy, Hoover's OnLine, I first took a look at the only major U.S. airline that is making any money these days, Southwest. Let's take a look at the scorecard:

Airline ScoreCard	DELTA	SOUTHWEST
Revenue (2002)	$13.3 Billion	$5.5 Billion
Net Income (2002)	Lost $1.3 Billion	Earned $241 MM
Stock Price - Jan 1999	$50	$10
Stock Price - 3-31-03	$11.25	$14.30
Stock Price - 4-yr % change	Declined 78%	Gained 43%
CEO Salary & Bonus - 2002	$2.2 Million	$543,000
Top 5 Execs Compensation	$7.8 Million	$2.5 Million

Any surprises here? The top five at Delta received an average of three times the compensation of their counterparts at Southwest. And get this, Delta paid their VP of HR over twice as much as the CEO of Southwest earns.

Now in regards to the Delta execs being compensated at “50% of their peer group”, obviously they are not counting Southwest Airlines as one of their peers…and well they shouldn't.

Southwest has continued to make money even with all the problems associated with 9-11 and the current Iraq situation. In checking the Hoover's data on American, United, and Continental, I find that they lost $3.5 billion, $3.2 billion, and $451 million respectively in 2002; and while all of these “money losing airlines” paid their executives considerably more than Southwest paid theirs, none of them paid their top five execs more than Delta.

No matter how you slice it, Leo Mullin and his fellow execs will have a hard time selling their fat wallets to their unions, their laid-off employees, their customers, and their shareholders. As a FF Medallion and loyal customer of Delta Air Lines for many years, I am very embarrassed by this whole situation.

It seems that the airline execs have become a bunch of bureaucrats who have lost sight of their main mission of running a profitable airline. They defend their fat salaries by comparing themselves to other money losing airlines instead of comparing themselves to the one airline that is making money. Just this week, Leo Mullin told a meeting of economists that “Delta must continue a program of cost reductions that outsizes any undertaken in its history.” Good luck Leo, you're going to need it.

Those Southwest guys would probably take a look at the 17 senior vice presidents at Delta and make sure that their compensation packages were in line with those of their new bosses…probably saving another few million.

The former Delta execs at Southwest would have a real tough time with the Southwest Board of Directors. They would probably all have to take a massive pay-cut or jump to one of their former “peer” airlines that continue to pay outrageous sums of money to senior executives while the businesses are going under.

Meanwhile, back in Atlanta, the former Southwest guys would be licking their chops at all of the money they could save by streamlining their management teams, listening to their customers, and doing whatever it takes to turn around the business. They might ask themselves, "Why do we need to pay our VP of HR almost a million dollars a year?"

The above may seem like a preposterous idea, but consider what you would do if you were the sole owner of Delta Air Lines and had lost 80% of your equity in the past four years. You would no doubt be ready for some drastic action.

Should Mr. Mullin be replaced? Probably, but before we address that, let's give him due credit for the many good things that he has done for Delta. Under his leadership since August of 1997, (from his Hoover's online bio) the airline's innovative developments in the areas of technology and e-commerce have been widely noted, prompting Forbes to name Mr. Mullin a member of the Year 2000 "e-Gang," along with 11 other CEOs of highly respected companies such as General Electric, Hewlett-Packard and Cisco Systems. Delta was named the No. 1 airline based on the annual Wichita State University Airline Quality Rating study published in April 2001. In addition, Forbes magazine ranked Delta No. 1 in five important customer service criteria for 2000.

Notice that all of the major accomplishments took place at least two years ago, long before there was an emergency situation within Delta and the airlines industry in general. Mr. Mullin brought an impressive resume to Delta in 1997 and has done a lot of great things for the airline. But this is business and there is a lot of money at stake; maybe it's time for a different kind of coach to lead the Delta team. And, after the public uproar following this bonus fiasco, Mr. Mullin has probably done irreparable damage to his reputation, thereby placing severe limits on his ability to inspire employees, shareholders or customers.

Perhaps Delta should launch a search to find a proven outstanding leader with experience in turning around a difficult and complex business in a less than ideal economic environment...maybe someone with enough personal assets to consider going to work for one dollar a year plus gobs of stock options...

If the Delta Board of Directors is listening, I want you to know that Ansley Consulting will be very happy to conduct this search for one-half of our standard fee. We believe in helping our clients when they are in trouble; and we don't pay bonuses in our company during a year in which we lose money...guess we are a little old-fashioned.

P.S.: Following my earlier article about the Augusta National controversy, I received a formal response from Hootie Johnson on engraved Augusta National stationery thanking me for my input...a true Southern gentleman. Sounds to me like he might be softening up a bit too; just this past week-end re-establishing the lifetime exemption for previous champions.

Jim Hicks specializes in delivering value well beyond executive search. Following a 27-year career equally split between line management and consulting, he founded The Ansley Consulting Group in June of 1999. He sincerely feels that the most important decisions a CEO will ever make are those regarding the recruitment of leaders and those involving the selection of leaders to be promoted. Jim's former roles include COO of Nautica, EVP of Polo, Principal at Kurt Salmon Associates, and implementer of The Deming Method while working with Bill Conway of Conway Management. A former officer in the U.S. Coast Guard, he holds an Industrial Engineering degree from Auburn University and an MBA from The University of Hawaii.