Use these links to rapidly review the documentPROXY STATEMENT TABLE OF CONTENTSTable of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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o | Soliciting Material under §240.14a-12 |
United | ||||
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April 29, 20169, 2020
Dear Stockholder:
On behalf of our Board of Directors, we are pleased to invite you to the 20162020 Annual Meeting of Stockholders (the "Annual Meeting") of United ContinentalAirlines Holdings, Inc. (the "Company" or "United") to be held on June 8, 2016.May 20, 2020. A notice of the 2016 Annual Meeting and proxy statement follows. Please read the enclosed information and our 20152019 Annual Report carefully before voting your proxy.
This year, we will continue to take advantage In light of the U.S. Securities and Exchange Commission rules that allow companies to furnish proxy materials to their stockholders oncoronavirus ("COVID-19") pandemic, for the Internet. We believe that these rules allow us to providesafety of all of our people, including our stockholders, and taking into account recent federal, state and local guidance that has been issued, we have determined that the 2020 Annual Meeting will be held in a virtual meeting format only, via the Internet, with the information they need while lowering the costs of deliveryno physical in-person meeting. At our virtual Annual Meeting, stockholders will be able to attend, vote and reducing the environmental impact of the 2016 Annual Meeting.submit questions by visitingwww.virtualshareholdermeeting.com/UAL2020.
Your vote is important. Even if you plan to attend the virtual Annual Meeting, in person, please authorize your proxy or direct your vote by following the instructions on each of your voting options described in the proxy statement and the Notice of Internet Availability.statement. You may vote your shares by Internet, telephone or mail pursuant to the instructions included on the proxy card or voting instruction card. We encourage you to use the first option and vote by Internet.
Thank you for your continued support of United. We look forward to seeing you at the 2016 Annual Meeting.
UNITED CONTINENTAL HOLDINGS, INC.233 South Wacker DriveChicago, Illinois 60606
NOTICE OF 2016 ANNUAL MEETING OF STOCKHOLDERSTO BE HELD JUNE 8, 2016
MATTERS TO BE VOTED ON:
Sincerely, | ||
Notice of 2020 Annual Meeting of Stockholders |
Date and Time
Wednesday, May 20, 2020
9:00 a.m., Central Time
Location
Our Annual Meeting can be accessed virtually at:www.virtualshareholdermeeting.com/UAL2020
Record Date
April 1, 2020
At the meeting, stockholders will be asked to:
1 | Elect the directors named in this proxy statement. | |
2 | Ratify the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for 2020. | |
3 | Consider an advisory vote to approve the compensation of the Company's named executive officers. | |
4 | Act on three stockholder proposals, if properly presented before the meeting. | |
5 | Act on any other matters that may be properly brought before the meeting. |
Jennifer L. Kraft
Vice President and Secretary
Chicago, Illinois
April 29, 20169, 2020
Proxy Voting
Even if you plan to attend the virtual Annual Meeting, in person,please authorize your proxy or direct your vote as promptly as possible.possible. You may vote your shares by Internet, telephone or mail pursuant to the instructions included on the Notice of Internet Availability, proxy card or voting instruction card. If you mailThe Notice of Internet Availability of Proxy Materials includes instructions for voting over the Internet and requesting a paper copy of the proxy or voting instruction card using the envelope provided, no postage is required if mailed in the United States.materials and proxy card. If you attend the Annual Meeting in personvirtually and want to withdrawrevoke your proxy, you may do so as described in the attached proxy statement and vote in personduring the Annual Meeting on all matters properly brought before the Annual Meeting.
You can find detailed information regardingabout voting in the section entitled "General Information"Information About the Annual Meeting" in the attached proxy statement.
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON JUNE 8, 2016.Important Notice Regarding the Internet Availability of Proxy Materials for the Annual Meeting of Stockholders to be Held on May 20, 2020. The Company's Notice of Annual Meeting, Proxy Statement and 20152019 Annual Report to Stockholders are available on the Internet athttp://www.envisionreports.com/ualwww.proxyvote.com.
PROXY STATEMENTTABLE OF CONTENTS
Table of Contents |
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| 1 | ||||||||
| 6 | ||||||||
Director Qualifications | 6 | ||||||||
Directors to be Elected by the Holders of Common Stock | 7 | ||||||||
| 14 | ||||||||
Corporate Governance | 16 | ||||||||
Corporate Governance Guidelines | 16 | ||||||||
Bylaws, Committee Charters and Other Policies | 17 | ||||||||
Prohibition on Hedging and Pledging | 18 | ||||||||
| 18 | ||||||||
Majority Voting; Resignation Policy | 19 | ||||||||
Board Meetings | 19 | ||||||||
Executive Sessions of Non-Management Directors | 20 | ||||||||
Board Leadership Structure | 20 | ||||||||
Board Oversight of Risk Management | 20 | ||||||||
Communications with the Board | 22 | ||||||||
Code of Ethics and Business Conduct | 22 | ||||||||
Environmental Sustainability | 22 | ||||||||
Community Engagement | 23 | ||||||||
Nominations for Directors | 24 | ||||||||
Committees of the Board | 26 | ||||||||
Compensation Committee Interlocks and Insider Participation | 29 | ||||||||
Certain Relationships and Related Transactions | 30 | ||||||||
Beneficial Ownership of Securities | 32 | ||||||||
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Directors and Executive Officers | 34 | ||||||||
Equity Compensation Plan Information | 35 | ||||||||
Executive Compensation | 36 | ||||||||
Compensation Discussion and Analysis | 36 | ||||||||
Named Executive Officers | 37 | ||||||||
Executive Summary | 37 | ||||||||
Tight Linkage between Performance and Executive Pay | 40 | ||||||||
Our 2019 Executive Compensation Governance Practices | 42 | ||||||||
Philosophy and Objectives of Our 2019 Executive Compensation Program | 44 | ||||||||
Compensation Process and Oversight | 45 | ||||||||
2019 Compensation Components | 48 | ||||||||
Other Compensation Components | 56 | ||||||||
Other Executive Compensation Matters | 57 | ||||||||
Compensation Committee Report | |||||||||
| 58 | ||||||||
Grants of Plan-Based Awards for | 61 | ||||||||
Narrative to 2019 Summary Compensation Table and Grants of Plan-Based Awards for 2019 Table | 62 | ||||||||
Outstanding Equity Awards at | 64 | ||||||||
Option Exercises and Stock Vested for 2019 | 66 | ||||||||
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Narrative to Pension Benefits Table | 68 | ||||||||
Potential Payments upon Termination or Change in Control |
Page | ||||
2019 CEO Pay Ratio | 79 | |||
| 81 | |||
Cash Retainers for Board and Committee Service | 83 | |||
Equity Compensation | 83 | |||
Non-Executive Chairman Compensation | 83 | |||
Director Compensation Deferral Under the DEIP | 84 | |||
Stock Ownership Guidelines | 84 | |||
Travel Benefits | 84 | |||
Charitable Contributions | 84 | |||
Audit Committee Report | 85 | |||
| 87 | |||
Independent Registered Public Accountants | 87 | |||
Audit Committee Pre-Approval Policy and Procedures | 87 | |||
Independent Registered Public Accounting Firm Fees | 88 | |||
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| 90 | |||
Proposal No. 4: Stockholder Proposal Regarding Stockholder Action by Written Consent | 93 | |||
Statement in Opposition to Stockholder Proposal | 94 | |||
| 96 | |||
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| 100 | |||
General Information About the Annual Meeting | 102 | |||
Submission of Stockholder Proposals for the 2021 Annual Meeting | 108 | |||
Householding | 108 | |||
Annual Report | 108 | |||
Other Business | 109 | |||
Appendix A: Reconciliation of GAAP | A-1 |
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Proxy Statement Summary |
This proxy statement contains forward-looking statements that reflect the expectations and beliefs of United Continental Holdings, Inc. (the "Company") with respect tosummary highlights certain current and future events, including its future plans with respect to share repurchases, anticipated changes to its fleet, its plans to drive ancillary revenue and its anticipated financial and operating performance. Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to, those described in Part I, Item 1A., "Risk Factors" of the Company's Annual Report on Form 10-K for the year ended December 31, 2015 (the "2015 Form 10-K"), as well as other risks and uncertainties set forth from time to time in the reports the Company files with the U.S. Securities and Exchange Commission (the "SEC"). All forward-looking statementsinformation contained elsewhere in this proxy statement are based uponstatement. This summary does not contain all of the information available to the Company on the date on whichthat you should consider, and you should read this proxy statement was filed with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changed circumstances or otherwise, except as required by applicable law.
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UNITED CONTINENTAL HOLDINGS, INC.233 South Wacker DriveChicago, Illinois 60606
PROXY STATEMENT2016 ANNUAL MEETING OF STOCKHOLDERSTo Be Held June 8, 2016
This proxy statement is furnished to you by the board of directors (the "Board") in connection with the solicitation of your proxy to be voted at the 2016 annual meeting of stockholders of United Continental Holdings, Inc., which we refer to as the "Annual Meeting," to be held on Wednesday, June 8, 2016, at 9:00 a.m., Central Time, at the Willis Tower, 233 South Wacker Drive, Chicago, Illinois 60606.our 2019 Annual Report carefully before voting. This proxy statement and the accompanying proxy card are being made available to you on approximately April 29, 2016.
In this proxy statement, the terms "we," "our," "us," "UAL" and the "Company" refer to United Continental Holdings, Inc. The Company became the parent company of Continental Airlines, Inc. (together with its consolidated subsidiaries, "Continental") upon the closing of a merger transaction (the "Merger") on October 1, 2010. As part of the Merger integration, on March 31, 2013, the Company merged its two operating subsidiaries, Continental and United Air Lines, Inc. ("United Air Lines"), with Continental continuing as the surviving corporation and as a wholly-owned subsidiary of the Company. Upon the closing of this transaction on March 31, 2013, Continental's name was changed to "United Airlines, Inc." ("United Airlines").
Internet Availability of Proxy Materials
We will continue to take advantage of the "Notice and Access" rules adopted by the U.S. Securities and Exchange Commission (the "SEC"), which allow public companies to deliver a "Notice of Internet Availability of Proxy Materials" and provide Internet access to proxy materials and annual reports to their stockholders. The use of Notice and Access generates cost savings for the Company and reduces the environmental impact of the Annual Meeting. In lieu of paper copies of the proxy statement and other materials, most of our stockholders will receive a "Notice of Internet Availability." The Notice of Internet Availability will include instructions on accessing and reviewing our proxy materials and annual report to stockholders on the Internet, and will provide instructions on submitting a proxy on the Internet. If you would like to receive paper or email copies of our proxy materials and annual report, please follow the instructions on the Notice of Internet Availability for requesting paper or email copies of our proxy materials and annual report.
The rules of the SEC allow us to deliver a single Notice of Internet Availability or set of proxy materials and annual report to one address shared by two or more of our stockholders. This delivery method is referred to as "householding" and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one Notice of Internet Availability or set of proxy materials and annual report to multiple stockholders who share an address, unless we have received different instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly,9, 2020.
2020 Annual Meeting of Stockholders Information |
Date and Time: | Wednesday, May 20, 2020, at 9:00 a.m., Central Time | |
Location*: | Our Annual Meeting can be accessed virtually via the Internet at:www.virtualshareholdermeeting.com/UAL2020 To participate in the virtual Annual Meeting, you will need the control number provided on your proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials. If you are not a stockholder or do not have a control number, you may still access the meeting as a guest, but you will not be able to submit questions or vote at the meeting. | |
Record Date: | April 1, 2020 | |
* In light of the coronavirus ("COVID-19") pandemic, for the safety of all of our people, including our stockholders, and taking into account recent federal, state and local guidance that has been issued, we have determined that the 2020 Annual Meeting will be held in a virtual meeting format only, via the Internet, with no physical in-person meeting. At our virtual Annual Meeting, stockholders will be able to attend, vote and submit questions. Whether or not you plan to attend the virtual Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in these proxy materials. Additional information can be found under "General Information About the Annual Meeting." |
Voting Matters |
Proposals | Board Recommendation | Page Number for Additional Information | ||||
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1. | Election of directors named in this proxy statement | FOR each of the nominees | 6 | |||
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2. | Ratification of the appointment of the independent registered public accounting firm for 2020 | FOR | 87 | |||
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3. | Advisory vote to approve the compensation of the Company's named executive officers | FOR | 90 | |||
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4. | Stockholder proposal regarding stockholder action by written consent | AGAINST | 93 | |||
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5. | Stockholder proposal regarding a report on lobbying spending | AGAINST | 96 | |||
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6. | Stockholder proposal regarding a report on global warming-related lobbying activities | AGAINST | 99 |
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| | 2020 Proxy Statement | | | | 1 |
Company Highlights |
upon written or oral request, We are proud of our performance in 2019. We reached our 2020 goal—first announced in January 2018—to achieve adjusted diluted earnings per share ("EPS")(1) in the range of $11 to $13 a separate Noticefull year ahead of Internet Availability orschedule. The Company achieved full year 2019 diluted EPS of $11.58 and adjusted diluted EPS(1) of $12.05. The Company also achieved full year 2019 pre-tax margin growth of 2.6 percentage points compared to full year 2018. This pre-tax margin growth outpaced our largest competitors. Operationally, United was number one in on-time departures at our hubs in Chicago, Denver and Los Angeles. And throughout 2019, our approximately 100,000 employees continued to drive customer service by embracing our core4 service decision framework principles of Safe, Caring, Dependable and Efficient.
As we started 2020, our United team was building on the momentum generated in 2019 and focused on the continued execution of our multi-year growth strategy, running a great operation and becoming the airline that customers choose to fly. In fact, January and February were the two best winter operational months in Company history(2) and also set new United records for customer satisfaction.
However, the onset of proxy materialsthe coronavirus ("COVID-19") pandemic and annual report, as requested,the resulting significant decline in demand for air travel required that we quickly shift our focus from our strategic plan for 2020 to any stockholdermanaging this crisis. As always, safety comes first at United, and the safety of our customers and employees remains our top priority. We continue to work closely with federal agencies and global health organizations to share information and ensure we are doing what we can to promote a safe and healthy environment in our facilities and on our aircraft. In response to the impact of COVID-19, we are proactively evaluating and cancelling flights on a rolling 90 day basis until we see signs of a recovery in demand, and are taking steps to improve our financial position in light of reduced demand. From a financial perspective, we have reduced our capital expenditures and operating expenditures, suspended share buybacks under our share repurchase program, entered into $2.75 billion in secured term loan facilities and taken a number of human capital management actions, among other items. In recognition of the impact of COVID-19 on United's business and to lead by example, Oscar Munoz, our Chief Executive Officer, and J. Scott Kirby, our President, have waived 100% of their respective base salaries from March 10 through at least June 30, 2020, all officers of the Company and United Airlines, Inc., the principal operating subsidiary of the Company ("United Airlines"), have temporarily waived 50% of their base salaries and our non-employee directors have waived 100% of their cash compensation for the second and third quarters of 2020.
We look forward to a time when this public health crisis is behind us, economic recovery is underway and demand for air travel returns. When this happens, we believe that our United team will be prepared to pick up where we left off, powered by our "uniquely United" advantages—the best airline professionals in the world who thrive on putting our customers at the shared addresscenter of everything we do, the best mid-continent hubs and coastal international gateways and our culture of innovation—and ready to which a single copy of those documents was delivered. If you prefer to receive separate copies offulfill the Annual Meeting materials, contact Broadridge Financial Solutions, Inc. ("Broadridge") by telephone at (800) 542-1061 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717.
If you are currently a stockholder sharing an address with another stockholder and are receiving multiple copiesgreat potential of our Noticeairline.
Voting Rights and Proxy Information
If you are a stockholder with shares of our voting stock, including our common stock, $0.01 par value per share ("Common Stock"), registered in your name with Computershare Investor Services ("Computershare"), the Company's transfer agent and registrar, then you are considered a "stockholder of record." Stockholders of record at the close of business on April 21, 2016, which is known as the "record date" for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof.
The following chart shows the number of shares of each class of our voting stock outstanding as of the record date, the number of record holders of each class as of the record date entitled to vote at the Annual Meeting, the votes per share for each class for all matters on which the shares vote, and the directors each class is entitled to elect. The aggregate number of votes to which a class is entitled is equalnon-GAAP financial measures to the number of shares outstanding of such class.most directly comparable GAAP measures.
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Title of Class | Shares Outstanding | Holders of Record(a) | Votes per Share | Voting for Directors | |||||||
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Common Stock | 335,699,674 | 8,785 | 1 | Class elects 12 directors | |||||||
Class Pilot MEC Junior Preferred Stock | 1 | 1 | 1 | Class elects 1 director | |||||||
Class IAM Junior Preferred Stock | 1 | 1 | 1 | Class elects 1 director |
How do I vote if I am a stockholder of record?
If you are a stockholder of record that holds shares as of the record date, you have three options for delivering your proxy to vote your shares:
You can vote via the Internet by logging ontohttp://www.envisionreports.com/ual and following the prompts using the control number located on your Notice of Internet Availability or proxy card. This vote will be counted immediately, and there is no need to mail your proxy card.
To use the telephone voting procedure, dial (800) 652-8683 and listen for further directions. You must use a touch-tone telephone in order to respond to the questions. This vote will be counted immediately, and there is no need to mail your proxy card.
Shares eligible to be voted, and for which a properly signed proxy card is returned, will be voted in accordance with the instructions specified on the proxy card.
Proxies submitted by Internet or telephone must be received by 11:59 p.m., Central Time, on Tuesday, June 7, 2016, the day before the Annual Meeting.
Even if you have submitted a proxy before the Annual Meeting, you may still attend the Annual Meeting and vote in person. If you vote in person at the Annual Meeting, your previously submitted proxy will be disregarded, but simply attending the Annual Meeting will not revoke a previously submitted proxy. See "Can I attend the Annual Meeting?" below for information regarding how to attend the Annual Meeting.
We encourage you to vote by Internet as instructed on the Notice of Internet Availability or proxy card.
How are my shares voted if I do not indicate how to vote on the proxy card?
If we receive a signed and dated proxy card and the proxy card does not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the Board, including FOR the election of each of the nominees for director (Proposal No. 1), FOR the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for fiscal year 2016 (Proposal No. 2) and FOR the advisory vote to approve the compensation of the Company's named executive officers (Proposal No. 3).
How do I vote if I hold my shares through an account at a broker, bank, trust or other nominee?
If you hold your shares in an account at a broker, bank, trust or other nominee, you are considered the "beneficial owner" of shares held in "street name," and you should have received a Notice of Internet Availability or a voting instruction card and voting instructions with these proxy materials from that organization rather than from us. To ensure that your vote is counted, follow the directions set forth on the Notice of Internet Availability or voting instruction card and the voting instructions that you receive. To vote in person at the Annual Meeting, you must obtain a legal proxy from your broker, bank, trust or other nominee. Follow the instructions from your broker, bank, trust or other nominee included with the Notice of Internet Availability or proxy materials, or contact your broker, bank, trust or other nominee, to request a legal proxy.
How do I vote my shares if I participate in one of the United 401(k) plans?
If you hold shares in an account under the United Airlines Ground Employee 401(k) Plan, the United Airlines Flight Attendant 401(k) Plan or the United Airlines Management and Administrative 401(k) Plan (each a "Plan," and collectively, the "United 401(k) Plans"), Computershare is sending you the Company's Notice of Internet Availability or proxy materials directly, including the voting instruction card. You may direct the trustee of the United 401(k) Plans, Evercore Trust Company, N.A., on how to vote your Plan shares by directing the voting of your Plan shares by Internet, telephone or mail pursuant to the instructions included on the Notice of Internet Availability or proxy card. Please note that, in order to permit the trustee for the United 401(k) Plans to tally and vote all of the shares of Common Stock held in the United 401(k) Plans, your instructions, whether by Internet, telephone or proxy card, must be completed and received prior to 5:00 a.m., Central Time, on Monday, June 6, 2016. You may not change your vote related to such Plan shares after this deadline.
If you do not provide voting instructions to the trustee, your Plan shares will be voted by the trusteeSelected highlights of our financial and operational results in the same proportion that it votes shares in other Plan accounts for which it did receive timely voting instructions. The proportional voting policy is detailed under the terms2019 are provided below:
• Achieved 2019 net income of $3.0 billion, pre-tax income of $3.9 billion, with pre-tax margin of 9.0%, and diluted EPS of $11.58 • Achieved 2019 adjusted net income(1) of $3.1 billion, adjusted pre-tax income(1) of $4.1 billion, with an adjusted pre-tax margin(1) of 9.4%, and adjusted diluted EPS(1) of $12.05 • Hosted Backstage 2019, which brought all 25,000 flight attendants to Chicago for a series of hands-on, interactive sessions and workshops focused on caring customer service | • Set new Company records by flying our highest number of revenue passengers in Company history(2) • Recognized by the Disability Equality Index for our disability inclusion policies and practices, and received a perfect score of 100%, for the ninth consecutive year, on the 2020 Corporate Equality Index, a premier benchmarking survey and report on corporate policies and practices related to LGBTQ+ workplace equality, administered by the Human Rights Campaign Foundation | • Strengthened our domestic route network with 69 new routes across the United States, and launched 9 new international routes • MileagePlus loyalty program voted Best Overall Frequent-Flyer Program in the world for the 16th consecutive year by readers ofGlobal Traveler, and voted Favorite Frequent-Flyer Program in the Trazee Awards • Opened the Company's fifth United Polaris lounge at Los Angeles International Airport |
Corporate Governance Highlights |
Highlights of each Plan and trust agreement.our corporate governance practices include:
Corporate Governance (See "Corporate Governance" on page 16)
If you receive more than one set of proxy materials, your shares are registered in more than one name or are registered in different accounts. In order to vote all of the shares that you own, you must either sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the Notices of Internet Availability or proxy cards that you receive.
Representatives of Computershare will tabulate the votes and act as Inspector of Election at the Annual Meeting.
A quorum is necessary for conducting a valid Annual Meeting. The presence in person or represented by proxy of the holders of outstanding shares representing at least a majority of the total voting power entitled to vote atIndependent Board leadership—following the Annual Meeting, is necessary to constitute a quorum atMr. Philip will become lead independent director when Mr. Munoz assumes the Annual Meeting. Where a separate voterole of a class or series of stock is required, the presence in person or represented by proxy of the holders of outstanding shares representing at least a majority of the total voting power of all outstanding shares of such class or series is necessary to constitute a quorum thereof entitled to take action with respect to such separate vote.
Under the rules of the New York Stock Exchange ("NYSE"), brokers, banks, trusts or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain "routine" matters even if they do not receive timely voting instructionsExecutive Chairman following his transition from the beneficial owner. With respectrole of Chief Executive Officer
A broker non-vote occurs when a beneficial owner of shares held by a broker, bank, trust or other nominee fails to provideBoard in the record holder with specific instructions concerning how to vote on any "non-routine" matters brought to a vote at a stockholders meeting. At the Annual Meeting, brokers will have discretionary authority to vote shares on the ratification of the appointment of the independent registered public accounting firm (Proposal No. 2), which is the only "routine" matter presented at the Annual Meeting. If brokers exercise this discretionary voting authority on Proposal No. 2, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting (Proposal Nos. 1 and 3), which are considered "non-routine."
Company's proxy materials (proxy access) How are abstentions and broker non-votes treated for quorum purposes, and how do they impact the voting results?
Abstentions are counted for purposes of determining whether a quorum is present. Abstentions will
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| | 2020 Proxy Statement | | | | 3 |
As explained above under "What are 'broker non-votes?,"' if brokers exercise their discretionary voting authority on Proposal No. 2, such shares will be considered present at the meeting for quorum
purposes and broker non-votes will occur as to each
If you are a beneficial owner of shares held by a broker, bank, trustnot permitted to hedge our securities or other nominee holding shares on your behalf, we urge you to submit your voting instructions to your broker, bank, trust or other nominee in advance of the Annual Meeting. Please see "How do I vote if I hold my shares through an account at a broker, bank, trust or other nominee?" abovepledge our securities as collateral for a discussionloan
Executive Compensation Governance (See "Executive Compensation" on page 36)
Environmental Sustainability and Community Engagement |
United is committed to building a sustainable future and supporting the procedures.
What classes of stock vote on each proposal, and what is the vote required?
The holders of Common Stock, Class Pilot MEC Junior Preferred Stock and Class IAM Junior Preferred Stock will vote together as a single class on all proposals presented at the Annual Meeting other than the election of directors (Proposal No. 1).
Election of Directors (Proposal No. 1)
Each director will be elected by vote of a majority of the votes cast with respect to that director's election in person or represented by proxy and entitled to vote on the election of directors. "Majority of the votes cast" means that the number of shares voted FOR a director exceeds the number of shares voted AGAINST that director (with abstentions and broker non-votes not counted as a vote cast either FOR or AGAINST that director's election). Any incumbent director who is not reelected in an electioncommunities in which majority voting applies is required to tender his or her resignation promptly following certification of the stockholders' vote. The Nominating/Governance Committee will then consider the tendered resignationwe operate. For additional information, see "Corporate Governance—Environmental Sustainability" on page 22 and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. The Board is expected to act"Corporate Governance—Community Engagement" on the recommendation within 120 days following certification of the stockholders' vote and will promptly disclose its decision regarding whether to accept the director's resignation offer. The director who tenders his or her resignation will not participate in the recommendation of the Nominating/Governance Committee or the decision of the Board with respect to his or her resignation.page 23.
Director Nominee Skills and Experience Highlights |
Proposal Nos. 2 and 3
The affirmative vote of a majority in voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter will be required to approve the ratification of the appointment of the independent registered public accounting firm (Proposal No. 2) and the advisory resolution approving the compensation of the named executive officers (Proposal No. 3).
How does the proxy voting process work?
Director Nominee Key Attributes |
Tenure | Age | Diversity | ||
9 of 13 Director Nominees are independent (including 9 of 11 Director Nominees to be elected by holders of our Common Stock) |
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If you vote using the Internet or telephone procedures specified in the Notice of Internet Availability or proxy card, or your proxy card is properly dated, signed and returned by mail, the proxy will be voted at the Annual Meeting in accordance with the instructions indicated by it (or if there are no such instructions, then in accordance with the recommendation of the Board).
If a quorum is not present at the time the Annual Meeting is convened for any particular purpose, or if for any other reason we believe that additional time should be allowed for the solicitation of proxies, we may adjourn the Annual Meeting with the vote of the stockholders then present.
Any proxy may be revoked by the person giving it at any time before it is voted (except as discussed above with respect to shares in a United 401(k) Plan account). A proxy may be revoked by a
Our Director Nominees (See "Proposal No. 1: Election of Directors" on page 6) |
Director | | Age | Director Since | Principal Occupation | Other Current Public Boards | Independent | Current Committee Membership | |||||||||||
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Directors to be Elected by the Holders of Common Stock | | | ||||||||||||||||
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Carolyn Corvi | | | 68 | | | 2010 | | Former VP and General Manager, The Boeing Company | | | 2 | | | ✓ | | • Audit • Executive • Finance (Chair) | ||
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Barney Harford | | | 48 | | | 2016 | | Former Chief Operating Officer, Uber Technologies, Inc. | | | — | | | ✓ | | • Finance • Nominating/Governance • Public Responsibility | ||
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Michele J. Hooper | | | 68 | | | 2018 | | President and CEO, The Directors' Council | | | 2 | | | ✓ | | • Audit • Compensation • Nominating/Governance | ||
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Walter Isaacson | | | 67 | | | 2006 | | Advisory Partner, Perella Weinberg Partners | | | — | | | ✓ | | • Executive • Nominating/Governance • Public Responsibility (Chair) | ||
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James A. C. Kennedy | | | 66 | | | 2016 | | Former President and CEO, T. Rowe Price Group, Inc. | | | 1 | | | ✓ | | • Compensation (Chair) • Executive • Finance | ||
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J. Scott Kirby | | | 52 | | | | | President, United Airlines Holdings, Inc. | | | — | | | President | | | ||
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Oscar Munoz | | | 61 | | | 2010 | | CEO, United Airlines Holdings, Inc. | | | — | | | CEO | | • Executive • Finance | ||
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Edward M. Philip | | | 54 | | | 2016 | | Former COO, Partners in Health | | | 3 | | | ✓ | | • Audit • Executive • Nominating/Governance (Chair) | ||
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Edward L. Shapiro | | | 55 | | | 2016 | | Former Managing Partner, PAR Capital Management, Inc. | | | — | | | ✓ | | • Compensation • Finance • Public Responsibility | ||
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David J. Vitale | | | 73 | | | 2006 | | Former Chairman, Urban Partnership Bank | | | — | | | ✓ | | • Audit (Chair) • Executive • Finance | ||
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James M. Whitehurst | | | 52 | | | 2016 | | President, International Business Machines Corporation | | | — | | | ✓ | | • Compensation • Finance • Nominating/Governance | ||
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Directors to be Elected by the Holders of Other Classes of Stock | | | ||||||||||||||||
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Todd M. Insler | | | 51 | | | 2016 | | Master Executive Council Chairman, United Airline Pilots Master Executive Council of ALPA | | | — | | | | | • Public Responsibility | ||
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Sito J. Pantoja | | | 63 | | | 2016 | | General Vice President, IAM Transportation Department | | | — | | | | | • Public Responsibility |
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later proxy delivered using the Internet or telephone voting procedures or by written notice mailed to the Secretary prior to the Annual Meeting. If you hold your shares through a broker, bank, trust or other nominee, you should follow their instructions as to how you can revoke a proxy. Attendance at the Annual Meeting will not automatically revoke a proxy, but a holder of Common Stock who is in attendance and entitled to vote at the Annual Meeting may request a ballot and vote in person, which revokes a previously granted proxy.
How are proxies being solicited and who pays solicitation expenses?
Proxies are being solicited by the Board on behalf of the Company. All expenses of the solicitation, including the cost of preparing and mailing this proxy statement, will be borne by us. Arrangements will also be made with custodians, nominees and fiduciaries for forwarding of proxy solicitation material to beneficial owners of Common Stock and voting preferred stock held of record, and we may reimburse these individuals for their reasonable expenses. In addition to mailed proxy materials and proxy materials available over the Internet, our directors, officers and employees may also solicit proxies in person, by telephone or by other means of communication. These individuals will not be additionally compensated, but may be reimbursed for out-of-pocket expenses associated with solicitation. To help assure the presence in person or representation by proxy of the largest number of stockholders possible, we have engaged MacKenzie Partners, Inc. ("MacKenzie"), a proxy solicitation firm, to solicit proxies on our behalf.
The Company has agreed to pay MacKenzie customary compensation for its solicitation services, including an initial retainer of $60,000 plus reimbursement for reasonable out-of-pocket expenses incurred during the solicitation. MacKenzie has advised us that its total fees are estimated to be $25,000 in connection with the solicitation. The Company has also arranged to indemnify MacKenzie against certain liabilities arising from or in connection with the solicitation.
Can I attend the Annual Meeting?
Admittance is limited to stockholders of the Company. The following procedures have been adopted to ensure that the Company's stockholders can check in efficiently when entering the Annual Meeting.
Stockholders of Record
If you are a stockholder of record on April 21, 2016 (the record date), you (or your duly appointed proxy holder) are entitled to attend the Annual Meeting. If you are a stockholder of record or you own shares through a Plan, there is an admission ticket located on your Notice of Internet Availability or proxy card. You will be asked to present the admission ticket and valid picture identification to obtain admittance to the Annual Meeting.
If you are a record holder (or a record holder's duly appointed proxy) and you do not bring an admission ticket with you to the Annual Meeting, you will be admitted upon verification of ownership at the stockholders' registration desk. Please be prepared to present valid picture identification.
Beneficial Owners
If you are a beneficial owner of Common Stock as of April 21, 2016, you may obtain admittance at the stockholders' registration desk by presenting evidence of your Common Stock ownership. This evidence could be a legal proxy from the institution that is the record holder of your shares, or your most recent account statement from your broker, bank, trust or other nominee that includes the record date, along with valid picture identification. Please note that in order to vote at the Annual Meeting, beneficial owners must present the legal proxy from the record holder.
PROPOSAL NO. 1ELECTION OF DIRECTORS
Proposal No. 1: Election of Directors |
The Nominating/Governance Committee has recommended to the Board,board of directors (the "Board") of United Airlines Holdings, Inc. (the "Company," "United," "we," "our" or "us"), and the Board has unanimously nominated, the individuals named below for election as directors at the 2020 Annual Meeting of Stockholders (the "Annual Meeting") to hold office until the next annual meeting of stockholders and until their successors are elected and qualified, or until their earlier death, resignation or removal. Each of the nominees currently serves as a director of the Company.Company, with the exception of J. Scott Kirby, who is currently the President of the Company and will become Chief Executive Officer of the Company following the Annual Meeting. There is no family relationship between any of the nominees or between any nominee and any executive officer of the Company.
As previously announced, each of Messrs. Meyer, Walker and Yamarone has notified the Company that he intends to retire from the Board at the end of his current term as director andJane C. Garvey will therefore, not stand for reelection to the Board at the Annual Meeting.Meeting and will retire from the Board at the end of her current term as director. The Company thanks Messrs. Meyer, WalkerMs. Garvey for her service on the Board. As further detailed below, at the Annual Meeting, 11 directors are nominated for election by the holders of our common stock, $0.01 par value per share ("Common Stock"), and Yamarone for their many yearstwo directors will be elected by the holders of distinguished service to the Company.our other classes of stock.
Shares represented by properly executed proxy cards will be voted, except where directed otherwise, FOR the election of each of the 12 nominees.11 nominees to be elected by the holders of our Common Stock. In the event that any nominee is unable to serve or for good cause will not serve, such shares will be voted FOR the election of such substitute nominee as the Board may propose. Each of the nominees has agreed to serve if elected, and management has no reason to believe that any of the nominees will be unable to serve.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ELECTION OF THE NOMINEES NAMED BELOW, WHICH IS DESIGNATED AS PROPOSAL NO. 1.
Director Qualifications |
Set forth on the following pages is biographical and other information about each nominee for election as a director. This information includes, but is not limited to, the business experience and directorships on the boards of public companies and registered investment companies held by each nominee during at least the past five years. This information also includes a discussion of the specific experience, qualifications, attributes and skills of each nominee that led to the Board's determination that such nominee is qualified and should serve as a director.
In addition to the information presented below regarding each nominee's specific experience, qualifications, attributes and skills, the Board believes that all of the nominees have demonstrated certain common attributes that the Board would generally expect any director nominee to possess. Those common attributes include an appropriate level of business, government or professional acumen, the capacity for strategic and critical thinking, leadership capabilities, a reputation for integrity and ethical conduct, and an ability to work collaboratively. Please see "Corporate Governance—Nominations for Directors" below for further discussion of the criteria considered by the Nominating/Governance Committee when identifying director nominees.
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6 | | | | 2020 Proxy Statement | | |
Directors to be Elected by the Holders of Common Stock |
TwelveEleven directors are to be elected by the holders of Common Stock. Each current director has served continuously since the date of his or her appointment. On April 19, 2016, the Company entered into an agreement (the "Settlement Agreement") with PAR Capital Management, Inc. ("PAR"), Altimeter Capital Management, LP ("Altimeter") and the other signatories listed on the signature page thereto, pursuant to which the Company, Altimeter and PAR settled a proxy contest for the election of directors. Pursuant to the Settlement Agreement, Messrs. Harford and Shapiro have been nominated for election at the Annual Meeting.
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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Carolyn Corvi | (1) | Retired Vice President and General Manager, Airplane Programs, Commercial Airplanes of Boeing Commercial Airplanes (commercial jet aircraft segment) of The Boeing Company ("Boeing") (2005-2008); Various other positions with Boeing for 34 years, including Vice President and General Manager of 737/757 Programs, Vice President of Aircraft Systems and Interiors, Vice President of the Propulsion Systems Division, Director of Quality Assurance for the Fabrication Division and Director of Program Management for 737/757 Programs. | 64 | 2010 | |||||||
(2) | Director—Allegheny Technologies Inc. (2012-present); Hyster-Yale Materials Handling, Inc. (2012-present); Goodrich Corporation (2009-2012); Continental (2009-2010). | ||||||||||
(3) | Ms. Corvi provides extensive management expertise to the Board, having served in key management and operational oversight roles for Boeing during her 34 years of service. She also brings an expertise with respect to the manufacturing of commercial aircraft, which she developed through her management of commercial airplane production for Boeing as Vice President and General Manager, Airplane Programs, Commercial Airplanes, Vice President and General Manager of 737/757 Programs, Vice President of Aircraft Systems and Interiors, Vice President of the Propulsion Systems Division, and in the other positions indicated above. Ms. Corvi brings experience to the audit committee function of the Board through her previous service on the Audit Committees of Continental and Goodrich Corporation and her current service on the Audit Committees of Allegheny Technologies Inc. and Hyster-Yale Materials Handling, Inc. Her service on the Continental board of directors provided her with valuable experience in the airline industry. | ||||||||||
Jane C. Garvey | (1) | Chairman of Meridiam, North America (infrastructure development fund) (2009-present); Vice President of U.S. Public Private Partnerships in Transportation at JPMorgan Chase (global financial services firm) (2008-2009); Executive Vice President and Chairman of Transportation Practice of APCO Worldwide (public affairs and strategic communications consulting firm) (2003-2008). | 72 | 2009 | |||||||
(2) | Director—Bombardier Inc. (2007-2008); Skanska (2003-2008). |
Carolyn Corvi |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Ms. Garvey brings extensive management oversight experience to the Board as Chairman of Meridiam, North America. She also provides valuable leadership experience and knowledge of the airline industry from her past role as administrator of the Federal Aviation Administration ("FAA"), where she was the first administrator to serve a five-year term, and as the recipient of the National Air Transportation Association's Distinguished Service Award. Through her various professional responsibilities, Ms. Garvey has also gained experience in a broad range of industries, including infrastructure development, financial services, transportation, construction and consulting. | ||||||||||
Barnaby "Barney" M. Harford | (1) | Chief Executive Officer of Orbitz Worldwide, Inc. (online travel company) (2009-2015); multiple roles at Expedia, Inc. (online travel company) (1999-2006), including President of Expedia Asia Pacific (2004-2006). | 44 | 2016 | |||||||
(2) | Director—Orbitz Worldwide, Inc. (2009-2015); eLong, Inc. (2004-2008). | ||||||||||
(3) | Mr. Harford brings travel industry and ecommerce insight, combined with a successful track record deploying large technology teams, having served as Chief Executive Officer of Orbitz Worldwide, Inc. He also provides experience with international markets, in particular the Asia Pacific region, having led Expedia's entry into China, Australia and Japan. He serves as Non-Executive Chairman of the board of directors of Lola, a chat-based travel planning service, (2016-present) and as a director of LiquidPlanner, Inc., an online project management software company (2007-present). He previously served as a director of GlobalEnglish Corporation (2008 to 2011) and Crystal Orange Hotel Group (formerly Mandarin Holdings) (2009 to 2012). | ||||||||||
Walter Isaacson | (1) | President and Chief Executive Officer of The Aspen Institute (international education and leadership institute) (2003-present); Chairman and Chief Executive Officer of CNN (July 2001-January 2003). | 63 | 2006 | |||||||
(2) | Chairman—CNN (July 2001-January 2003). |
Independent Age: 68 Director Since: 2010 Committees: Audit, Executive and Finance (Chair) | Select Business Experience: • Vice President and General Manager, Airplane Programs, Commercial Airplanes of Boeing Commercial Airplanes (commercial jet aircraft segment) of The Boeing Company ("Boeing") (2005-2008) • Various other positions with Boeing for 34 years, including Vice President and General Manager of 737/757 Programs, Vice President of Aircraft Systems and Interiors, Vice President of the Propulsion Systems Division, Director of Quality Assurance for the Fabrication Division and Director of Program Management for 737/757 Programs Current Public Company Directorships: • Allegheny Technologies Incorporated (2012-present) • Hyster-Yale Materials Handling, Inc. (2012-present) Past Public Company Directorships: • Goodrich Corporation (2009-2012) • Continental Airlines, Inc. ("Continental") (2009-2010) Other Experience and Qualifications: Ms. Corvi provides extensive management expertise to the Board, having served in key management and operational oversight roles for Boeing during her 34 years of service. She also brings an expertise with respect to the manufacturing of commercial aircraft, which she developed through her management of commercial airplane production for Boeing as Vice President and General Manager, Airplane Programs, Commercial Airplanes, Vice President and General Manager of 737/757 Programs, Vice President of Aircraft Systems and Interiors, Vice President of the Propulsion Systems Division, and in the other positions indicated above. Ms. Corvi brings experience to the audit committee function of the Board through her previous service on the Audit Committees of Continental and Goodrich Corporation and her current service on the Audit Committee of Hyster-Yale Materials Handling, Inc. Her service on the Continental board of directors provided her with valuable experience in the airline industry. |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Mr. Isaacson provides valuable business operations expertise and extensive management knowledge, having served as President and Chief Executive Officer of The Aspen Institute. Prior to that position, he gained leadership experience and strategic development and implementation skills as Chairman and Chief Executive Officer of CNN. Mr. Isaacson has also served as the editor ofTime Magazine. In 2009, Mr. Isaacson was appointed by President Obama to be Chairman of the Broadcasting Board of Governors, which runs international broadcasts for the U.S. government. He served in this role until January 2012. Through his various professional positions, Mr. Isaacson has gained experience in a broad range of industries, including education, economics, communications and broadcasting. | ||||||||||
James A. C. Kennedy | (1) | President and Chief Executive Officer of T. Rowe Price Group, Inc. ("T. Rowe Price") (global investment management organization) (2007-2015). | 62 | 2016 | |||||||
(2) | Director—T. Rowe Price (1996-April 2016). | ||||||||||
(3) | Mr. 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, a global investment management organization which provides mutual fund, sub-advisory and institutional asset management. Prior to his appointment as President and Chief Executive Officer of T. Rowe Price, Mr. Kennedy served in roles of increasing responsibility since 1978, including equity analysis, Director of Equity Research as of 1987, and Head of U.S. Equities from 1997-2006. Mr. Kennedy also brings executive compensation experience to the Board, having served as the Chairman of the Management Compensation Committee at T. Rowe Price for nine years. | ||||||||||
Robert A. Milton | (1) | Chairman and Chief Executive Officer of ACE Aviation Holdings Inc. (holding company for Air Canada and other aviation interests) (2011-2012); Chairman, President and Chief Executive Officer of ACE Aviation Holdings Inc. (2004-2011); Chairman of Air Canada (2004-2007); President and Chief Executive Officer of Air Canada (1999-2004); Executive Vice-President and Chief Operating Officer of Air Canada (1996-1999); Chairman of the Board of Governors of IATA (The International Air Transport Association) (2005-2006). | 55 | 2016 |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(2) | Lead Director—Air Lease Corporation (2010-present); AirAsia Berhad (June 2013-June 2015); Director—US Airways, Inc. (2005-2006). | ||||||||||
(3) | Mr. Milton brings extensive airline industry experience to the Board, providing deep industry experience in management and operations relevant to the Company. Mr. Milton has spent his entire career in the airline industry, most recently as Chairman and Chief Executive Officer of ACE Aviation Holdings Inc., and previously as Chairman, President and Chief Executive Officer of Air Canada. Having joined Air Canada in 1992 in a consulting capacity, Mr. Milton also held previous roles including Senior Director of Scheduling, Vice President, Scheduling and Product Management, Senior Vice President, Marketing and In-Flight Service and Executive Vice President and Chief Operating Officer. Further, Mr. Milton brings corporate governance expertise to the Board, having served as the lead independent director of Air Lease Corporation since 2010. Mr. Milton also brings executive compensation experience and financial expertise to the Board, enhanced by his service on the Audit and Compensation Committees of Air Lease Corporation. | ||||||||||
Oscar Munoz | (1) | President and Chief Executive Officer of the Company (Sept. 2015-present); President and Chief Operating Officer of CSX Corporation ("CSX") (railroad and intermodal transportation services company) (Feb. 2015-Sept. 2015); Executive Vice President and Chief Operating Officer of CSX (2012-2015); Executive Vice President and Chief Financial Officer of CSX (2003-2012). | 57 | 2010 | |||||||
(2) | Director—CSX (Feb. 2015-Sept. 2015); Continental (2004-2010). |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Mr. Munoz provides valuable expertise in management, finance, accounting and auditing to the Board. He developed this expertise during his more than 25 years of service prior to joining the Company in key executive positions within the telecommunications, beverage and transportation industries. As our President and Chief Executive Officer, Mr. Munoz is responsible for, and has extensive familiarity with, the Company's ongoing operations and management's efforts to implement the strategic priorities identified by the Board. Mr. Munoz is uniquely suited to inform the Board with respect to these matters. Prior to joining the Company, Mr. Munoz served as the President and Chief Operating Officer of CSX from February 2015 until September 2015, with responsibility for managing all aspects of CSX's operations across its 21,000-mile network, including transportation, service design, customer service, engineering, mechanical and technology. In this role, Mr. Munoz also oversaw sales and marketing, human resources and information technology. Immediately prior to this role, Mr. Munoz served as Executive Vice President and Chief Operating Officer of CSX. Mr. Munoz also previously served as Executive Vice President and Chief Financial Officer of CSX, with responsibility for management and oversight of all financial, strategic planning, information technology, purchasing and real estate activities of CSX. In addition, he developed extensive experience in the airline industry during his six years of service on the Continental board of directors. | ||||||||||
William R. Nuti | (1) | Chairman, Chief Executive Officer and President of NCR Corporation (global technology) (2007-present); Chief Executive Officer and President of NCR Corporation (2005-2007). | 52 | 2013 | |||||||
(2) | Director—NCR Corporation (2005-present); Coach, Inc. (2014-present); Sprint Nextel Corporation (2008-2013). |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Mr. Nuti provides the Board with valuable expertise in management, finance and technology, developed during his years of service in the technology industry. Mr. Nuti has extensive experience in key management and operational oversight roles, including serving as Chairman, Chief Executive Officer and President of NCR Corporation, and President, Chief Executive Officer and Chief Operating Officer of Symbol Technologies. Mr. Nuti also brings to the Board the perspective of an active chief executive officer with primary responsibility for the oversight of all aspects of a publicly traded, global technology company with international operations. Mr. Nuti also brings executive compensation and financial experience to the Board, enhanced by his service on the Compensation Committee of Coach, Inc., having previously served on its Audit Committee and having served on the Compensation and Finance Committees of Sprint Nextel Corporation. | ||||||||||
Edward L. Shapiro | (1) | Managing Partner on leave of absence from PAR (investment management firm) (April 25, 2016-present); multiple roles at PAR (1997-April 2016), including Managing Partner (2014-April 25, 2016); Partner (1999-2013); and portfolio manager at PAR (1997-April 25, 2016). | 51 | 2016 | |||||||
(2) | Chairman—Global Eagle Entertainment, Inc. (2013-present); Director—LodgeNet Interactive Corporation (2010-2012); US Airways (2005-2008). | ||||||||||
(3) | Mr. Shapiro brings to the Board financial expertise and an investor's perspective, having served in various capacities at PAR, an investment management firm specializing in investments in travel, media and Internet-related companies, from 1997 to present. He also currently serves as Chairman of the board of directors of Lumexis Corporation, an in-seat, inflight entertainment company, and is a member of the board of directors of Sonifi Solutions (formerly LodgeNet Interactive Corporation). | ||||||||||
Laurence E. Simmons | (1) | Chairman of SCF Partners (private equity investment management) (1989-present). | 69 | 2010 | |||||||
(2) | Director—Zions Bancorporation (1978-present); Continental (2009-2010); Oil States International, Inc. (2001-2007). |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Mr. 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. Mr. Simmons also brings to the Board his experience in both the airline industry and the audit committee function, having served on the Boards of Directors and Audit Committees of Continental and ExpressJet Holdings, Inc. In addition, he serves in leadership roles in a number of civic and community organizations in the Houston area, the location of one of the Company's hub airports. | ||||||||||
David J. Vitale | (1) | Chair of the Urban Partnership Bank (2010-present); Chairman of Duff & Phelps Global Utility Income Fund (2011-present), DNP Select Income Fund, Inc. (2009-present), DTF Tax-Free Income Inc. (2015-present) and Duff & Phelps Utility and Corporate Bond Trust (investment companies) (2015-present); President, Chicago Board of Education (education) (2011-2015); Senior Advisor to the Chief Executive Officer of the Chicago Public Schools (education) (2007-2008); Chief Administrative Officer of the Chicago Public Schools (2003-2007). | 69 | 2006 | |||||||
(2) | Director—Duff & Phelps Global Utility Income Fund (2011-present); DTF Tax-Free Income Inc. (2005-present); Duff & Phelps Utility and Corporate Bond Trust (2005-present); DNP Select Income Fund, Inc. (2000-present); Alion Science & Technology Corporation (2009-2014). |
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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(3) | Mr. Vitale provides valuable financial and management expertise to the Board through many years of experience in significant business roles. Mr. Vitale served as President of the Chicago Board of Education, with responsibility for the governance, organizational and financial oversight of the Chicago Public Schools. Mr. Vitale has acted both as Chief Administrative Officer of the Chicago Public Schools and Senior Advisor to the Chief Executive Officer of the Chicago Public Schools, where he provided oversight for all educational departments, including finance, operations, human resources, technology and procurement. He brings to the Board expertise on the audit committee function, having served on the Audit Committee of Alion Science & Technology Corporation. He brings additional leadership experience to the Board by serving as Chairman of Duff & Phelps Global Utility Income Fund, DNP Select Income Fund, Inc., DTF Tax-Free Income Inc. and Duff & Phelps Utility and Corporate Bond Trust. Through his extensive professional roles, Mr. Vitale gained experience in a number of industries, including education, banking, financial services and investment management. | ||||||||||
James M. Whitehurst | (1) | President and Chief Executive Officer of Red Hat, Inc. ("Red Hat") (provider of open source enterprise IT products and services) (2008-present); Chief Operating Officer of Delta Air Lines, Inc. ("Delta") (2005-2007); Chief Network and Planning Officer of Delta (2004-2005); Senior Vice President—Finance, Treasury, and Business Development of Delta (2002-2004). | 48 | 2016 | |||||||
(2) | Director—SecureWorks Corp. (2016-present); DigitalGlobe, Inc. (2009-2016). | ||||||||||
(3) | Mr. Whitehurst provides valuable business expertise in addition to airline industry knowledge to the Board. Prior to Red Hat, Mr. Whitehurst spent six years at Delta, where he managed airline operations and drove significant international expansion as Chief Operating Officer. Mr. Whitehurst helped put the company back on firm footing as it emerged from bankruptcy in 2007. Before Delta, he held several corporate development leadership roles at The Boston Consulting Group, with clients across a wide range of industries. |
Barney Harford |
Independent Age: 48 Director Since: 2016 Committees: Finance, Nominating/Governance and Public Responsibility | Select Business Experience: • Chief Operating Officer of Uber Technologies, Inc. ("Uber") (2018-2019) • Chief Executive Officer of Orbitz Worldwide, Inc. (online travel company) (2009-2015) • Multiple roles at Expedia, Inc. (online travel company) (1999-2006), including President of Expedia Asia Pacific (2004-2006) Past Public Company Directorships: • Orbitz Worldwide, Inc. (2009-2015) • eLong, Inc. (2004-2008) Other Experience and Qualifications: Mr. Harford brings travel industry and ecommerce insight, combined with a successful track record deploying large technology teams, having served as Chief Executive Officer of Orbitz Worldwide, Inc. He also provides experience with international markets, in particular the Asia Pacific region, having led Expedia's entry into China, Australia and Japan. Mr. Harford also brings valuable strategy and operational experience to the Board, having served as Chief Operating Officer of Uber, where he was responsible for the company's global ridesharing business, leading operations, strategy, marketing, customer support, safety and insurance in over 60 countries, and for the company's food-delivery business Uber Eats. He previously served on the board of directors of Lola (2016-2017), LiquidPlanner, Inc., (2007-2017), Crystal Orange Hotel Group (formerly Mandarin Holdings) (2009-2012) and GlobalEnglish Corporation (2008-2011). |
Directors to be Elected by the Holders
Michele J. Hooper |
Independent Age: 68 Director Since: 2018 Committees: Audit, Compensation and Nominating/Governance | Select Business Experience: • President and Chief Executive Officer, The Directors' Council (consulting firm that works with corporate boards to increase their independence, effectiveness and diversity) (2013-present) • President and Chief Executive Officer, Voyager Expanded Learning (developer and provider of learning programs and teacher training in public schools) (1999-2000) • President and Chief Executive Officer, Stadtlander Drug Company (provider of disease-specific pharmaceutical care) (1998-1999) Current Public Company Directorships: • PPG Industries, Inc. ("PPG") (1997-present). On November 19, 2019, PPG filed a Current Report on Form 8-K with the Securities and Exchange Commission (the "SEC") disclosing that Ms. Hooper was not standing for re-election at PPG's 2020 annual meeting scheduled for April 16, 2020 • UnitedHealth Group, Inc. (2007-present) Past Public Company Directorships: • AstraZeneca PLC (2003-2012) • Warner Music Group Corporation (2006-2011) Other Experience and Qualifications: Ms. Hooper provides extensive corporate governance expertise to the Board and, as President and Chief Executive Officer of The Directors' Council, has consulted with major companies to enhance the effectiveness of their corporate governance. Ms. Hooper has significant public company audit committee experience, with over 20 years of experience chairing audit committees at PPG Industries, Inc., AstraZeneca PLC, Warner Music Group Corporation and Target Corporation. Ms. Hooper's corporate governance and accounting experience, along with her experience as a senior executive at a range of companies, provides the Board with a unique set of skills that enhances the Board's leadership and oversight capabilities. |
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8 | | | | 2020 Proxy Statement | | |
Table of Other ClassesContents
Walter Isaacson |
Independent Age: 67 Director Since: 2006 Committees: Executive, Nominating/Governance and Public Responsibility (Chair) | Select Business Experience: • Advisory Partner, Perella Weinberg Partners (a financial services firm) (2017-present) • President and Chief Executive Officer of The Aspen Institute (international education and leadership institute) (2003-2018) • Chairman and Chief Executive Officer of CNN (2001-2003) Past Public Company Directorships: • CNN (2001-2003) (Chairman) Other Experience and Qualifications: Mr. Isaacson provides valuable business operations expertise and extensive management knowledge, having served as President and Chief Executive Officer of The Aspen Institute. Prior to that position, he gained leadership experience and strategic development and implementation skills as Chairman and Chief Executive Officer of CNN. Mr. Isaacson has also served as the editor ofTime Magazine. In 2009, Mr. Isaacson was appointed by President Obama to be Chairman of the Broadcasting Board of Governors, which runs international broadcasts for the U.S. government. He served in this role until January 2012. Through his various professional positions, Mr. Isaacson has gained experience in a broad range of industries, including education, economics, communications and broadcasting. |
James A. C. Kennedy |
Independent Age: 66 Director Since: 2016 Committees: Compensation (Chair), Executive and Finance | Select Business Experience: • President and Chief Executive Officer of T. Rowe Price Group, Inc. ("T. Rowe Price") (global investment management organization) (2007-2015) • Various other roles at T. Rowe Price throughout his tenure from 1978 to 2016 Current Public Company Directorships: • Columbia Care Inc. (2019-present) Past Public Company Directorships: • T. Rowe Price (1996-2016) Other Experience and Qualifications:Mr. Kennedy brings to the Board a stockholders' perspective and his expertise in management, finance and leadership, particularly as result of his tenure as President and Chief Executive Officer of T. Rowe Price, a global investment management organization which provides mutual fund, sub-advisory and institutional asset management. Prior to his appointment as President and Chief Executive Officer of T. Rowe Price, Mr. Kennedy served in roles of increasing responsibility at T. Rowe Price since 1978, including equity analysis (1978-1987), Director of Equity Research (1987-1999), and Head of U.S. Equities (1997-2006). Mr. Kennedy also brings executive compensation experience to the Board, having been involved in management compensation since 1987, and served as the Chairman of the Management Compensation Committee at T. Rowe Price for nine years. |
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J. Scott Kirby |
Age: 52 | Select Business Experience: • President of the Company (August 2016-present). In December 2019, the Company announced that Mr. Kirby will become Chief Executive Officer of the Company following the Annual Meeting • President of American Airlines Group and American Airlines, Inc. (2013-August 2016) • President of US Airways (2006-2013) Other Experience and Qualifications:As our President, Mr. Kirby is responsible for United's operations, marketing, sales, alliances, network planning and revenue management, among other items. Mr. Kirby has been instrumental in the development and implementation both of the Company's strategic growth plan and its core4 culture. He also has extensive airline industry experience, having served as President of American Airlines Group and American Airlines, Inc. from 2013 to August 2016, as President of US Airways from October 2006 to December 2013 and in other significant leadership roles at US Airways and at America West prior to the 2005 merger of those carriers, including as Executive Vice President, Sales and Marketing (2001-2006); Senior Vice President, e-business (2000-2001); Vice President, Revenue Management (1998-2000); Vice President, Planning (1997-1998); and Senior Director, Scheduling and Planning (1995-1998). Prior to joining America West, Mr. Kirby worked for American Airlines Decision Technologies and at the Pentagon. |
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Oscar Munoz |
Age: 61 Director Since: 2010 Committees: Executive and Finance | Select Business Experience: • Chief Executive Officer of the Company (Sept. 2015-present). In December 2019, the Company announced that following the Annual Meeting, Mr. Munoz will transition from the role of Chief Executive Officer of the Company and assume the role of Executive Chairman of the Board • President of the Company (Sept. 2015-Aug. 2016) • President and Chief Operating Officer of CSX Corporation ("CSX") (railroad and intermodal transportation services company) (Feb. 2015-Sept. 2015) • Executive Vice President and Chief Operating Officer of CSX (2012-2015) • Executive Vice President and Chief Financial Officer of CSX (2003-2012) Past Public Company Directorships: • CSX (Feb. 2015-Sept. 2015) • Continental (2004-2010) Other Experience and Qualifications: As our Chief Executive Officer, Mr. Munoz is responsible for the Company's business and ongoing operations and management's efforts to implement the strategic priorities identified by the Board. Mr. Munoz is uniquely suited to inform the Board with respect to these matters. Mr. Munoz has also developed key expertise with respect to all aspects of the airline industry during his tenure as the Company's CEO. In addition, Mr. Munoz provides valuable expertise in management, finance, accounting and auditing to the Board. He developed this expertise during his time as the Company's CEO, as well as through more than 25 years of service prior to joining the Company in key executive positions within the telecommunications, beverage and transportation industries. Prior to joining the Company, Mr. Munoz served as the President and Chief Operating Officer of CSX from February 2015 until September 2015, with responsibility for managing all aspects of CSX's operations across its 21,000-mile network, including transportation, service design, customer service, engineering, mechanical and technology. In this role, Mr. Munoz also oversaw sales and marketing, human resources and information technology. Immediately prior to this role, Mr. Munoz served as Executive Vice President and Chief Operating Officer of CSX. Mr. Munoz also previously served as Executive Vice President and Chief Financial Officer of CSX, with responsibility for management and oversight of all financial, strategic planning, information technology, purchasing and real estate activities of CSX. In addition, he developed extensive experience in the airline industry during his six years of service on the Continental board of directors. |
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Edward M. Philip |
Independent Age: 54 Director Since: 2016 Committees: Audit, Executive and Nominating/Governance (Chair) | Select Business Experience: • Chief Operating Officer of Partners in Health (non-profit healthcare organization) (2013-2017) • Special Partner of Highland Consumer Fund (consumer oriented investment fund) (2013-2017) • Managing General Partner of Highland Consumer Fund (2006-2013) • President and Chief Executive Officer of Decision Matrix Group (research and consulting firm) (2004-2005) • Senior Vice President of Terra Networks, S.A. (Spanish internet multinational company) (2000-2004) Current Public Company Directorships: • Hasbro, Inc. (2002-present) • BRP Inc. (2005-present) • Experience Investment Corp. (2019-present) Other Experience and Qualifications: Mr. Philip brings to the Board nearly three decades of leadership across the technology, health care and financial services sectors. Mr. Philip was also one of the founding members of the internet search company, Lycos, Inc. During his tenure with Lycos, Mr. Philip held the positions of President, Chief Operating Officer and Chief Financial Officer at different times. Prior to joining Lycos, he spent time as the Vice President of Finance for The Walt Disney Company and a number of years in investment banking. |
Edward L. Shapiro |
Independent Age: 55 Director Since: 2016 Committees: Compensation, Finance and Public Responsibility | Select Business Experience: • Managing Partner of PAR Capital Management, Inc. ("PAR") (investment management firm) (1999-2016) • Portfolio Manager, PAR (1997-2016) Past Public Company Directorships: • Global Eagle Entertainment, Inc. (2013-2019) • Sonifi Solutions (formerly LodgeNet Interactive Corporation) (2010-2012) • US Airways (2005-2008) • Web.com (formerly Interland) (2001-2005) Other Experience and Qualifications: Mr. Shapiro brings to the Board financial expertise and an investor's perspective, having served in various capacities at PAR, an investment management firm specializing in investments in travel, media and internet-related companies, from 1997 to 2016. Mr. Shapiro served as Chairman of Global Eagle Entertainment, Inc., a provider of a wide range of connectivity solutions, including portable entertainment solutions, from 2013 to March 2018, and served as lead independent director from March 2018 to June 2019. He also formerly served as Chairman of the board of directors of Lumexis Corporation, an in-seat, inflight entertainment company, and as a member of the boards of directors of Sonifi Solutions, US Airways and Web.com. |
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David J. Vitale |
Independent Age: 73 Director Since: 2006 Committees: Audit (Chair), Executive and Finance | Select Business Experience: • Chairman of the Urban Partnership Bank (2010-2019) • Chairman of Duff & Phelps Global Utility Income Fund (2011-present), DNP Select Income Fund, Inc. (2009-present), DTF Tax-Free Income Inc. (2015-present) and Duff & Phelps Utility and Corporate Bond Trust (2015-present) (investment companies) • President, Chicago Board of Education (education) (2011-2015) • Senior Advisor to the Chief Executive Officer of the Chicago Public Schools (education) (2007-2008) • Chief Administrative Officer of the Chicago Public Schools (2003-2007) Current Registered Investment Company Directorships: • Duff & Phelps Global Utility Income Fund (2011-present) • DTF Tax-Free Income Inc. (2005-present) • Duff & Phelps Utility and Corporate Bond Trust (2005-present) • DNP Select Income Fund, Inc. (2000-present) Past Public Company Directorships: • Alion Science & Technology Corporation (2009-2014) Other Experience and Qualifications: Mr. Vitale provides valuable financial and management expertise to the Board through many years of experience in significant business roles. Mr. Vitale previously served as the Chairman of the Urban Partnership Bank and as President of the Chicago Board of Education, where he was responsible for governance, organizational and financial oversight of the Chicago Public Schools. Mr. Vitale has acted both as Chief Administrative Officer of the Chicago Public Schools and Senior Advisor to the Chief Executive Officer of the Chicago Public Schools, where he provided oversight for all educational departments, including finance, operations, human resources, technology and procurement. He brings to the Board expertise on the audit committee function, having served on the Audit Committee of Alion Science & Technology Corporation. He brings additional leadership experience to the Board by serving as Chairman of Duff & Phelps Global Utility Income Fund, DNP Select Income Fund, Inc., DTF Tax-Free Income Inc. and Duff & Phelps Utility and Corporate Bond Trust. Through his extensive professional roles, Mr. Vitale gained experience in a number of industries, including education, banking, financial services and investment management. |
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James M. Whitehurst |
Independent Age: 52 Director Since: 2016 Committees: Compensation, Finance and Nominating/Governance | Select Business Experience: • President, International Business Machines Corporation ("IBM") (April 2020-present) • Senior Vice President, IBM and Chief Executive Officer of Red Hat, Inc. ("Red Hat") (provider of open source enterprise IT products and services) (2019-April 2020). • President and Chief Executive Officer of Red Hat (2008-2019) • Chief Operating Officer of Delta Air Lines, Inc. ("Delta") (2005-2007) • Chief Network and Planning Officer of Delta (2004-2005) • Senior Vice President—Finance, Treasury and Business Development of Delta (2002-2004) Past Public Company Directorships: • Red Hat (2008-2019) • SecureWorks Corp. (2016-2019) • DigitalGlobe, Inc. (2009-2016) Other Experience and Qualifications: Mr. Whitehurst provides valuable business expertise in addition to airline industry knowledge to the Board. Prior to IBM and Red Hat, Mr. Whitehurst spent six years at Delta, where he managed airline operations and drove significant international expansion as Chief Operating Officer. Mr. Whitehurst helped put Delta back on firm footing as it emerged from bankruptcy in 2007. Before Delta, he held several corporate development leadership roles at The Boston Consulting Group, with clients across a wide range of industries. |
Directors to be Elected by the Holders of Other Classes of Stock |
The following classes of directors are to be elected by the holders of certain classes of our stock other than Common Stock.
THE HOLDERS OF COMMON STOCK DO NOT VOTE ON THE ELECTION OF THE FOLLOWING DIRECTORS.
Each nominee was previously elected or appointed by the holder of the applicable class of our preferred stock and has served continuously as a director since the date of his first election or appointment. If a nominee unexpectedly becomes unavailable before election, or we are notified that a substitute nominee has been selected, votes will be cast pursuant to the authority granted by the proxies from the respective holder(s) for the person who may be designated as a substitute nominee.
ALPA Director—Elected by the Holder of Class Pilot MEC Junior Preferred Stock |
One director (the "ALPA director") is to be elected by the United Airlines Pilots Master Executive Council of ALPA (the "ALPA MEC"), the holder of our Class Pilot MEC Junior Preferred Stock.Stock, the United Airlines Pilots Master Executive Council of Air Line Pilots Association, International (the "ALPA MEC"). The ALPA MEC has nominated and intends to elect Todd M. Insler as the ALPA director. The Board has recommended that the ALPA MEC vote FOR Mr.Captain Insler.
Captain Insler is a current employee of the Company. His compensation for his role as a United pilot is determined under the collective bargaining agreement between United and the Air Line Pilots
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Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | ||||||||
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Todd M. Insler | (1) | Master Executive Council Chairman of ALPA MEC (2016-present); Captain, United Boeing 767 (2015-present); Captain, Airbus A320 Aircraft (2010-2015). | 47 | 2016 | |||||||
(2) | Not applicable. | ||||||||||
(3) | Captain Insler provides valuable management expertise and knowledge of aviation and airline services to the Board. Captain Insler has served in key labor union management positions within ALPA, including most recently chairman of the MEC Grievance Committee, member of the United Pilots' System Board of Adjustment and member of the ALPA National Information Technology Advisory Committee. In addition, Captain Insler has served as a captain for Boeing 767 aircraft since October 2015 and previously as a captain for Airbus A320 aircraft. |
Association ("ALPA"). Captain Insler does not receive any cash or equity compensation for his service as the ALPA director.
IAM Director—Elected by the Holder of Class IAM Junior Preferred Stock
Todd M. Insler |
Age: 51 Director Since: 2016 Committees: Public Responsibility | Select Business Experience: • Master Executive Council Chairman of ALPA MEC (2016-present) • Captain, United Boeing 767 (2015-present) • Captain, Airbus A320 Aircraft (2010-2015) Other Experience and Qualifications: Captain Insler provides valuable management expertise and knowledge of aviation and airline services to the Board. Captain Insler has served in key labor union management positions within ALPA, including Chairman of the MEC Grievance Committee, member of the United Pilots' System Board of Adjustment and member of the ALPA National Information Technology Advisory Committee. In addition, Captain Insler has served as a captain for Boeing 767 aircraft since October 2015 and previously as a captain for Airbus A320 aircraft. |
IAM Director—Elected by the Holder of Class IAM Junior Preferred Stock |
One director (the "IAM director") is to be elected by the IAM, the holder of our Class IAM Junior Preferred Stock.Stock, the International Association of Machinists and Aerospace Workers (the "IAM"). The IAM has nominated and intends to elect Sito J. Pantoja as the IAM director. The Board has recommended that the IAM vote FOR Mr. Pantoja.
Nominee | (1) Business Experience (2) Public Company and Registered Investment Company Directorships (3) Experience and Qualifications | Age | Director Since | |||||
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Sito Pantoja | (1) | General Vice President of the IAM Transportation Department (2012-present); Transportation Department Chief of Staff (2005-2012). | 59 | 2016 | ||||
(2) | Not applicable. | |||||||
(3) | Mr. Pantoja provides valuable management expertise and knowledge of aviation and airline services to the Board. In addition to his current position, Mr. Pantoja has served in key labor union management positions such as the IAM's representative to the Federal Aviation Administration's Rulemaking Advisory Committee and as a member of the IAM's National Pension Fund's Board of Trustees. |
Sito J. Pantoja |
Age: 63 Director Since: 2016 Committees: Public Responsibility | Select Business Experience: • General Vice President of the IAM Transportation Department (2012-present) • IAM Transportation Department Chief of Staff (2005-2012) Other Experience and Qualifications: Mr. Pantoja provides valuable management expertise and knowledge of aviation and airline services to the Board. In addition to his current position, Mr. Pantoja has served in key labor union management positions such as the IAM's representative to the Federal Aviation Administration's Rulemaking Advisory Committee and as a board member of the Guide Dogs of America. |
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Corporate Governance |
We are committed to high standards of corporate governance and to conducting our business ethically and with integrity and professionalism. In furtherance of these commitments, the Board has adopted Corporate Governance Guidelines developed and recommended by the Nominating/Governance Committee, which are available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Corporate Governance Guidelines.Guidelines" under the heading "Governance Documents."
Corporate Governance Guidelines |
The Nominating/Governance Committee monitors developments in the laws, regulations and best practices relating to corporate governance and periodically recommends to the Board the adoption of amendments to the Corporate Governance Guidelines to reflect those developments. The current Corporate Governance Guidelines provide for the governance practices described below.
Independence. Our Corporate Governance Guidelines require that a majority of the Board be "independent" under the criteria for independence established by the NYSE,rules of the Nasdaq Stock Market LLC (the "Nasdaq Listing Rules") and any other applicable rules or regulations, and the Board has adopted categorical standards to assist it in determining whether a director has any direct or indirect material relationship with the Company. Please see "Director Independence" below for a discussion of the Board's independence determinations.
Limitation on Board Service. None of our directors is permitted to serve on the board of directors of more than four other public companies, andcompanies. In addition, no director who is an active chief executive officer or the equivalent of another public company is permitted to serve on the boards of more than two other public companies. No member of the Company's management is permitted to serve on the board of directors of another company if an independent director of the Company serves as the chairman, chief executive officer or president of such other company.
Retirement Age for Directors. No candidate is eligible for election or reelection as a director if at the time of such election he or she is 75 or more years of age, unless the Board affirmatively determines otherwise.
Changes in Business or Professional Affiliations or Responsibilities. If a director experiences a substantial change in his or her principal business or professional affiliations or responsibilities from the time such individual was first elected toduring his or her term on the Board, the director is required to volunteer to resign from the Board. The Board, through the Nominating/Governance Committee (excluding the director who volunteered to resign, if a member of the Nominating/Governance Committee), will have the opportunity to review the continued appropriateness of the director's Board membership under the particular circumstances, and shall determine whether to accept such resignation.
Conflicts of Interest. Our Corporate Governance Guidelines require any director with a potential conflict of interest to disclose the matter to the Chairman of the Board and the Lead Director (if appointed at the time, as defined below) before any decision is made related to the matter. If the Chairman of the Board and the Lead Director, in consultation with legal counsel, determine that a conflict exists, or that the perception of a conflict is likely to be significant, then the director is obligated to recuse himself or herself from any discussion or vote related to the matter.
Lead Director. Pursuant to our Corporate Governance Guidelines, in the event that the Chairman of the Board is not an independent director, the independent directors may designate a lead director from among the independent directors (the "Lead Director"). If the independent directors do not designate a Lead Director, then the Chairman of the Nominating/Governance Committee will become the Lead Director
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on anex officio basis. Following the Annual Meeting, Mr. Philip will become the Lead Director of the Board when Mr. Munoz assumes the role of Executive Chairman following his transition from the role of Chief Executive Officer.
The Lead Director's responsibilities include, but are not limited to, the following: consulting with the Chairman of the Board to determine the agenda for Board meetings; presiding at all meetings of the Board at which the Chairman of the Board is not present, including executive sessions of the independent directors; serving as liaison between the Chairman of the Board and the independent directors; approving information sent to the Board;
approving meeting agendas for the Board; approving meeting schedules to assure that there is sufficient time for discussion of all agenda items; having the authority to call meetings of the independent directors; coordinating the agenda for moderating sessions of the Board's independent directors; assisting the Board in assuring compliance with and implementation of the Corporate Governance Guidelines; and, if requested by major stockholders, ensuring that he or she is available for consultation and direct communication.
Annual Performance Evaluation of the Board. The Nominating/Governance Committee develops, recommends to the Board and coordinates the annual performance evaluation of the Board to determine whether the Board is functioning effectively and meeting its objectives and goals. Each of the Audit Committee, Compensation Committee, Executive Committee, Finance Committee, Nominating/Governance Committee and the Public Responsibility Committee separately perform annual self-evaluations. The collective evaluation results are reported by the committee chair to the full committee for discussion. In addition, the Nominating/Governance Committee periodically performs an evaluation of each director's individual performance.
Annual Meeting Attendance. Our directors are expected to attend each annual meeting of stockholders absent exceptional reasons. All of our incumbent directors then in office at the time attended the 20152019 annual meeting of stockholders.
Bylaws, Committee Charters and Other Policies |
In addition to those practices established by our Corporate Governance Guidelines, our Amended and Restated Bylaws (the "Bylaws"), the charters of the Board committees and our other Company policies provide for the following significant corporate governance practices:
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Prohibition on Hedging and Pledging |
Under our securities trading policy, our officers, directors and directorscertain other management employees are prohibited from engaging in speculative and derivative trading, short-selling, or otherwise hedging orour securities. This restriction includes the purchase and sale of puts, calls, warrants, options, forward-sale contracts, prepaid collars and similar derivative instruments.
Our officers, directors and certain other management employees are also prohibited from pledging of our securities.
Director Independence |
In connection with the annual determination of director independence, the Board has adopted the following categorical standards as part of the Company's Corporate Governance Guidelines to assist the Board in determining whether a director has any direct or indirect material relationship with the Company.
Under the categorical standards adopted by the Board, a director is not independent if:
Company, other than director and committee fees, and pension or other forms of deferred compensation for prior service (provided such compensation is not contingent in any way on continued service);
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The Board has also considered the purchase of the Company's air carrier services in the ordinary course by the employer of any director who is actively employed, and has determined that such purchases are immaterial in amount and significance, and therefore do not preclude a finding of independence for such director.
For purposes of these categorical standards, (i) an "immediate familya "family member" of a director includes a director's spouse, parents, children and siblings, mothers and fathers-in-law, sons and daughters-in-law, brothers and sisters-in-law, andwhether by blood, marriage or adoption, or anyone (other than domestic employees) who sharesresiding in such director'sperson's home, and (ii) the "Company" means United ContinentalAirlines Holdings, Inc. and its direct and indirect subsidiaries.
In connection with the determination of director independence, the Nominating/Governance Committee reviewed the categorical standards adopted by the Board together with the rules of the NYSENasdaq Listing Rules and other applicable legal requirements. The Nominating/Governance Committee also reviewed information compiled from the responses to questionnaires completed by each of the directors, information derived from the Company's corporate and financial records and information available from public records.
Consistent with the recommendation of the Nominating/Governance Committee, the Board has applied these independence tests and standards to each of the current directors and nominees for director. The Board made a determination that: (i)has affirmatively determined that each of Mmes.Mses. Corvi, Garvey and Garvey,Hooper, and Messrs. Harford, Isaacson, Kennedy, Meyer, Milton, Nuti,Philip, Shapiro, Simmons, Vitale Walker,and Whitehurst and Yamarone qualify as "independent" under the applicable independence tests and standards;standards. Messrs. Kirby, Munoz and (ii) Messrs. Munoz,Pantoja and Captain Insler and Pantoja do not qualify as "independent" under the applicable tests and standards. Mr.Messrs. Kirby and Munoz isare not independent as he is anthey serve as executive officerofficers and employeeemployees of the Company. Mr.Captain Insler is not independent because he is a currentan employee of United Airlines. Mr. Pantoja is not independent because he is affiliated with the IAM, a union that represents certain of the Company's employees. William R. Nuti, who retired from the Board in May 2019, was also determined to be independent. Please see "Proposal No. 11: Election of Directors" above for a list of all nominees, together with biographical summaries for the nominees, including each individual's business experience, directorships and other qualifications.
In addition, three directors who have departed the Company but served on the Board during 2015, Messrs. Smisek, Delaney and Heppner, were determined not to be independent. Mr. Smisek was not
independent because he served as an executive officer and employee of the Company. Mr. Delaney was not independent because he was a previous employee of the Company. Mr. Heppner was not independent due to his service as an employee of the Company during his service on the Board.
Majority Voting; Resignation Policy |
The Bylaws and the Corporate Governance Guidelines provide that directors will be elected by a majority voteof votes cast in uncontested elections and a plurality vote in contested elections. When a majority vote standard applies, the Corporate Governance Guidelines require any incumbent director who fails to receive a majority of the votes cast in an uncontested election to immediately tender his or her resignation to the Board.Board promptly following certification of the stockholders' vote. The Nominating/Governance Committee will consider the tendered resignation, and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. The Board willis expected to act on the recommendation within 120 days following certification of the Nominating/Governance Committee,stockholders' vote and will promptly disclose its decision regarding whether to accept the director's resignation offer through a press release, a Current Report on Form 8-K, or other means of public disclosure itsdeemed appropriate. The director who tenders his or her resignation will not participate in the recommendation of the Nominating/Governance Committee or the decision regarding whetherof the Board with respect to accept the director's resignation offer.his or her resignation.
Board Meetings |
The Board meets regularly on previously determined dates, and special meetings are scheduled when required. The Board held 11seven meetings in 2015.2019. During 2015,2019, each of the incumbent directors who served in 2015 attended at least 75% of the total number of meetings of the Board and each committee of which he or she was a member (during the period he or she was a member).member. As indicated above under "Corporate Governance Guidelines—Annual Meeting Attendance," our directors are also expected to attend each annual meeting of stockholders absent exceptional reasons.
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Executive Sessions of Non-Management Directors |
Our non-management directors regularly meet separately in executive session outside the presence of management directors. Our Corporate Governance Guidelines currently provide that the independent Chairman of the Board or Lead Director as applicable,(in the event the Chairman of the Board is not independent) preside over non-management director executive sessions. In addition, our Corporate Governance Guidelines require our independent directors to meet outside the presence of management and the other directors at least twice per year, with the independent Chairman or Lead Director, as applicable, also presiding over such sessions.
Board Leadership Structure |
The Board has the responsibility for selecting the appropriate leadership structure for the Company. Our Corporate Governance Guidelines state that the offices of the Chairman of the Board and Chief Executive Officer may be either combined or separated, in the Board's discretion.
The Board is currently led by an independent Chairman, Mr. Meyer. Mr. Meyer is not standing for reelectionMs. Garvey. As previously disclosed, Ms. Garvey will retire from the Board at the Annual Meeting, and the Board has elected Mr. Milton to serve as Non-Executive Chairman effective immediately following the electionend of directorsher current term at the Annual Meeting. Following the Annual Meeting, Mr. Munoz will transition from the role of Chief Executive Officer of the Company and assume the role of Executive Chairman of the Board. At such time, pursuant to a selection process conducted by the independent directors, Mr. Philip will become Lead Director. The Board believes that separatingthis structure is appropriate for the roles of Chief Executive Officer and Chairman of the Board is the most appropriate structure at this time, partly to assist in the effective transition in the leadership of the Company.Company because it allows Mr. Munoz, our Chief Executive Officer, is expected to assume the Chairman role at the Company's 2018 annual meeting of stockholders as contemplated bywith his amended employment agreement. Having an independent Chairman of the Board at this time is a means to ensure that Mr. Munoz is able to more exclusively focus on his roleunique experience having served as Chief Executive Officer, before taking onto lead the additional responsibility as ChairmanBoard and to support Mr. Kirby during this time of the Board.transition. The Board also believes that an independent Chairmanthe appointment of the Board can effectively manage the relationship between the Board and the Chief Executive Officer during this transition period.
It is the Board's expectation that Mr. Munoz will be appointed Chairman of the Board at the Company's 2018 annual meeting of stockholders. Prior to making any such appointment, the Board will reassess whether this leadership structure is the most appropriate at that time. When the roles of Chairman of the Board and Chief Executive Officer are combined, a Lead Director will be selected byprovides effective oversight and reinforces the independent directors to ensure that the Board continues to be governed by sufficient independent oversight. For a discussion of the responsibilities of the Lead Director, please see "Corporate Governance Guidelines—Lead Director" above. The Board believes that having a Lead Director as part of its leadership structure provides substantial independent oversight, promotes greater management accountability and ensures that directors have an independent contact on matters of concern to them. The Board believesBoard's independence during this leadership model strikes an appropriate balance between consistent leadership and independent oversight.time.
Board Oversight of Risk Management |
The Board considers effective risk oversight an important priority. As we consider risks in connection with virtually every business decision, the Board discusses risk throughout the year generally and also in connection with specific proposed actions. The Board's approach to risk oversight includes understanding the critical risks in the Company's business and strategy, evaluating the Company's risk management processes, allocating responsibilities for risk oversight among the full Board and its committees, and fostering an appropriate culture of integrity and compliance with legal and ethical responsibilities.
The Board exercises its oversight of our risk management policies and practices primarily through its committees, as described below, which regularly report back to the Board regarding their risk oversight activities.
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account the review of the Company's risk assessment and risk management policies and strategies managed through the Company's Audit Committee).
determination, somethe Compensation Committee considered certain of our compensation policies, practices and programs that were considered include:program features including: oversight by an independent compensation committee; our balance of base pay combined with short- and long-term incentives that reward both absolute and relative performance measures;measures, as well as strategic objectives and individual performance; 2019 long-term incentives include time-vested restricted share unit awards, which help to further balance performance results and contain the overall volatility of outstanding incentives; our annual incentive awards include a cap on maximum payout opportunities;opportunities which mitigates against excessive earn-out potentials; performance awards occur annually, resulting in overlapping cyclesperformance periods that evenseven out business cycles and introducesintroduce multiple-year incentive horizons; use of multiple performance metrics to create a further balance of rewards; payout timing over multi-year and overlapping performance periods; the useinclusion of consistent performance metrics and incentives across performance periods; the inclusion of a profitability gate for the annual incentive and a discretionary gate for the other cash incentives based on the Company's having an adequate cash balance; the Compensation Committee retains discretion to reduce the annual incentive payouts below the formulaic performance results; inclusion of equity incentives and stock ownership guidelines that discourage short-term risks that disadvantage long-term stock price; theour compensation claw-back policy and inclusion of clawbackclaw-back provisions in our programs; and securities trading policies that prohibit pledging and hedging of our securities, including our Common Stock, by our officers and directors.
Additionally, starting in the first quarter of 2020, the Board has been meeting regularly to consider and discuss updates on the Company's management of the COVID-19 pandemic, including with regard to the Company's operations, financial position and liquidity, communications strategy, personnel management and government affairs engagement, among other items.
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While the Board oversees risk management, the Company's management is charged with identifying and managing the risks. The Company has robust internal processes and a strong internal control environment to identify and manage risks and to communicate with the Board about these risks. These include an enterprise risk management program, an enterprise risk management committee, an ethics and compliance program, and comprehensive internal and external audit processes. The Board receives periodic reports on each of these aspects of the Company's risk management process. In addition, the Board, through the Audit and Finance Committees, participates in the enterprise risk management process by providing feedback on management's identification and assessment of the key risks facing the Company.
Communications with the Board |
Stockholders and other interested parties may contact the Board as a whole, or any individual member, including the Lead Director,Chairman or the non-management or independent directors as a group, by one of the following means: (i) writing to the Board of Directors, United ContinentalAirlines Holdings, Inc., c/o the Corporate Secretary's Office—Office, 233 S. Wacker Drive, Chicago, Illinois 60606; or (ii) emailing the Board atUALBoard@united.com.
Stockholders may communicate with the Board on an anonymous or confidential basis. The Board has designated the General CounselExecutive Vice President and Chief Administrative Officer and the Corporate Secretary's Office as its agents for receipt of communications. All communications will be received, processed and initially reviewed by the Corporate Secretary's Office. The Corporate Secretary's Office generally does not forward communications that are not related to the duties and responsibilities of the Board, including junk mail, service complaints, employment issues, business suggestions, job inquiries, opinion surveys and business solicitations. The Corporate Secretary's Office maintains all communications and they are all available for review by any member of the Board at his or her request.
The Chairman of the Audit Committee is promptly advised of any communication that alleges management misconduct or raises legal, ethical or compliance concerns about Company policies and practices. The Chairman of the Audit Committee receives periodic updates from the Corporate
Secretary's Office on other communications from stockholders and determines which of these communications to review, respond to, or refer to another member of the Board.
Code of Ethics and Business Conduct |
Code of Ethics
The Company has adopted a code of ethics, the "Ethics"Code of Ethics and Compliance Principles,Business Conduct," for directors, officers (including the Company's principal executive officer, principal financial officer and principal accounting officer), employees and employees.third-party representatives such as contractors, consultants and agents of the Company and its subsidiaries. The code serves as a "Code of Ethics" as defined by SEC regulations and as a "Code of Business Conduct and Ethics" under the Listed Company Manual of the NYSE.Nasdaq Listing Rules. The code is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Code of Conduct.Ethics and Business Conduct" under the heading "Governance Documents."
Environmental Sustainability |
United is committed to building a sustainable future as part of its long-term strategy and strives to minimize its environmental impact. In 2019, United received an A-score from the Carbon Disclosure Project for its strategy and actions to reduce the company's environmental impact, marking the sixth consecutive year that United led the U.S. airline industry in this assessment. Through its Eco-Skies program, the Company continuously looks for ways to reduce its environmental footprint, with efforts focused on (i) fuel efficiency and emissions reduction; (ii) the development and use of sustainable fuel sources; (iii) sustainable products and materials management; and (iv) partnering with customers and stakeholders to promote sustainability and protect the environment.
Nominations Fuel efficiency and emissions reduction. Improving fuel efficiency is critical to the Company's ability to manage its carbon footprint. In 2018, the Company announced a pledge to reduce its greenhouse gas emissions by 50 percent relative to 2005 levels by the year 2050, and it is taking various actions that are expected to help reduce its carbon dioxide emissions over time. United has made significant investments in a modern, fuel-efficient fleet, including 15 new aircraft delivered in 2019. The Company is also implementing
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operational and procedural changes to drive fuel conservation. For example, over 4,000 of the Company's ground service equipment around the world are electric or use alternative fuels. United also has LEED certified buildings in Chicago, Houston and San Francisco and continues to evaluate ways to reduce its non-fuel energy use at other facilities in the Company's network.
Sustainable fuel sources. United is working with strategic partners to generate sustainable aviation fuel to enable the Company to reduce its emissions and provide energy diversification. The Company uses sustainable aviation fuel from World Energy in its daily operations at Los Angeles International Airport and has sourced more than four million gallons of sustainable aviation fuel since 2016. Additionally, in 2019, the Company renewed its contract with World Energy with the option to purchase up to 10 million gallons of sustainable aviation fuel through May 2021. In 2015, the Company made a $30 million equity investment in Fulcrum BioEnergy, Inc., a company that has developed a process for Directors
transforming municipal solid waste into low carbon transportation fuels ("Fulcrum"), and entered into a long-term supply agreement with Fulcrum which provides United with the opportunity to purchase at least 90 million gallons of sustainable aviation fuel a year for a minimum of 10 years from Fulcrum, subject to availability.
Sustainable products and materials management. United is focused on responsibly managing and reducing the waste generated onboard its aircraft, in airports and throughout its operations. In 2019, United diverted over 36,000 pounds of obsolete seat covers from landfills by downcycling the covers to shredded fabric that is reusable for other products, such as insulation and carpet padding.
Eco-Skies partners. United partners with its employees, customers, airports, suppliers and governmental organizations to advance its sustainability efforts and protect the environment. For example, United has worked with Conservation International since 1998 as part of its Business & Sustainability Council, a community of companies committed to leveraging their business experiences and resources to protect nature for the benefit of humanity. In addition, together with Audubon International and the Port Authority of New York and New Jersey, United launched the Raptor Relocation Program to protect kestrels, hawks, owls and other birds in and around New York-area airports and resettle them to more suitable habitats. In 2019, the Company and Audubon International expanded this program to San Francisco International Airport.
Additional information on United's commitment to environmental sustainability is available atunited.com/ecoskies.
Community Engagement |
At United, we believe in connecting people, and that every action we take to positively impact our community counts. The Company focuses its community engagement on (i) investing in communities where our employees and customers live and work; (ii) lifting up communities impacted by disaster; (iii) breaking down barriers and promoting inclusion; (iv) inspiring the next generation of leaders; and (v) flying towards a more sustainable future.
Investing in communities where our employees and customers live and work. United is committed to investing in the communities where its employees and customers live and work. In 2019, United launched "Miles on a Mission," a first-of-its-kind crowdsourcing platform through which eligible non-profit organizations and charities can raise miles for their organizations' travel needs and customers can donate miles. In 2019, United customers donated more than 13 million miles and United donated an additional 3.4 million miles, totaling over 16 million miles, to the Miles on a Mission program. Additionally, United employee-volunteers supported projects both in their local communities as well as projects on a global scale. Since 2017, United employees have assembled more than one million meal kits to be distributed to more than 10 countries around the world in partnership with Rise Against Hunger. In 2019, United employees contributed more than 107,000 volunteer service hours to Company-sponsored community outreach projects and to other organizations of their choice.
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Lifting up communities impacted by disaster. United is committed to supporting communities impacted by disaster. Since 2013, United, its employees and customers have raised nearly $10 million and shipped more than one million pounds of relief supplies to impacted areas. In 2019, United donated $1.6 million to Feeding America and regional foodbanks in support of families who needed assistance due to loss of income resulting from the federal government shutdown. The Company also made $165,000 in direct donations to funds providing assistance to those impacted by the California wildfires and worked with the American Red Cross to provide approximately 5,000 blankets to shelters across the state of California. In January 2020, the Company donated $250,000 toward the Ellen DeGeneres Show's campaign to raise $5 million to aid in relief efforts for the Australian wildfires and matched $50,000 in donations to the Australian Wildfire Relief Fund created by GlobalGiving's Disaster Recovery Network.
Breaking down barriers and promoting inclusion. At United, we strive to create a true sense of human connection to demonstrate how we lead with heart and value every individual's unique needs. United has a global partnership with Special Olympics and shares Special Olympics' mission of creating a world where all are included and given the chance to participate. Since 2017, United employees have spent more than 12,000 hours volunteering with Special Olympics.
Inspiring the next generation of leaders. United is committed to inspiring future generations of aviation leaders by supporting K-12 STEM education, college and career readiness and workforce development. As the official airline of Global Glimpse, United provides transportation to more than 1,000 students and their teachers to participate in service-learning trips to Ecuador, Panama and the Dominican Republic each summer. In 2019, United hosted more than 500 girls from diverse backgrounds at 14 locations around the world for Girls in Aviation Day to encourage their excitement and interest in aviation. Also, in 2019, United sponsored 43 primary and middle school educators from the Company's hub markets to participate in Air Camp's four-day professional development program for teachers, inspiring them to confidently incorporate aviation and STEM concepts into their classrooms and potentially reaching up to 170,000 students annually.
Flying towards a more sustainable future. In support of the Company's environmental sustainability initiatives, United engages in projects designed to reduce landfill waste and support those in need. United is proud to be the first airline to partner with Clean the World, an organization that works to prevent millions of hygiene-related deaths each year. Through the Company's partnership with Clean the World, United collects approximately 50,000 pounds of unused premium cabin amenity kits annually and recycles the products in them to support disaster relief, homeless shelters and aid organizations around the world.
Nominations for Directors |
As described below, our Nominating/Governance Committee identifies and recommends for nomination individuals qualified to be Board members, other than directors elected by holders of preferred stock of the Company (the ALPA director and the IAM director). The Nominating/Governance Committee identifies directors through a variety of means, including suggestions from members of the Nominating/Governance Committee and the Board, as well as suggestions from Company officers, employees and others.stockholders. The Nominating/Governance Committee may retain a search firm to identify director candidates (other than those elected by holders of preferred stock of the Company). The Nominating/Governance Committee has retained Spencer Stuart, an executive search and leadership consulting firm, to assist with identifying potential director candidates.
In addition, the Nominating/Governance Committee considers candidates for director positions suggested by stockholders. Pursuant to the Settlement Agreement, in April 2016, the Board appointed two new directors, Messrs. Harford and Shapiro, to the Board and, under the terms of the Settlement Agreement, the Board has nominated Messrs. Harford and Shapiro for election at the Annual Meeting. In addition, under the Settlement Agreement, the Nominating/Governance Committee, PAR and Altimeter will work together in good faith to identify an additional independent director as promptly as possible who is mutually agreeable to the Board, PAR and Altimeter. Under the terms of the Settlement Agreement, following the identification of the new independent director, the Board will promptly appoint the new independent director to the Board and is obligated to nominate and recommend the new independent director for election at the 2017 annual meeting of stockholders, subject to certain exceptions as set forth in the Settlement Agreement. In March 2016, the Board appointed independently three new directors to the Board, Messrs. Kennedy, Milton and Whitehurst, each of whom was recommended by Spencer Stuart.
Holders of Common Stock may submit director candidates for consideration (other than those elected by holders of preferred stock of the Company) by writing to the Chairman of the Nominating/Governance Committee, United ContinentalAirlines Holdings, Inc., c/o the Corporate Secretary's Office—Office, 233 S. Wacker Drive, Chicago, Illinois 60606. Stockholders must provide the recommended candidate's name, biographical data, qualifications and other information required by Section 2.10 of the Bylaws with respect to director nominations by stockholders.
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A candidate for election as a director of the Board (other than those elected by holders of preferred stock of the Company) should possess a variety of characteristics. Candidates for director recommended by stockholders must be able to fulfill the independence standards established by the Board as set forth in the listing standards of the NYSE,Nasdaq Listing Rules, any other applicable rules or regulations, and in the Company's Corporate Governance Guidelines as outlined above under "Director Independence."
Submissions of candidates who meet the criteria for director nominees approved by the Board will be forwarded to the Chairman of the Nominating/Governance Committee for further review and consideration. The Nominating/Governance Committee reviews the qualifications of each candidate and
makes a recommendation to the full Board. The Nominating/Governance Committee considers all potential candidates in the same manner and by the same standards regardless of the source of the recommendation and acts in its discretion in making recommendations to the full Board. Any invitation to join the Board (other than with respect to any director who is elected by holders of preferred stock of the Company) is extended by the entire Board through the Chairman of the Board or the Chairman of the Nominating/Governance Committee.
In addition to recommending director candidates to the Nominating/Governance Committee, stockholders may also, pursuant to procedures established in the Bylaws, directly nominate one or more director candidates to stand for election at an annual or special meeting of stockholders. For an annual meeting of stockholders, a stockholder wishing to make such a nomination must deliver written notice of the proposed nomination to the Secretary of the Company not less than 90 days nor more than 120 days prior to the anniversary date of the immediately preceding annual meeting of stockholders. For a special meeting of stockholders, a stockholder wishing to make such a nomination must deliver written notice of the nomination to the Secretary of the Company not earlier than 120 days prior to the date of such special meeting and not later than the close of business on the later ofof: (x) 90 days prior to the date of such special meetingmeeting; and (y) 10 days following the day on which public announcement is first made of the date of such special meeting. In either case, a notice of nomination submitted by a stockholder must include information concerning the nominating stockholder and the stockholder's nominee(s) as required by the Bylaws.
In accordance with a February 2016 amendment to the Bylaws, stockholders may also submit director nominees to the Board to be included in the Company's annual proxy statement, known as "proxy access." Stockholders who intend to submit director nominees for inclusion in the Company's proxy materials for the 20172021 annual meeting of stockholders must comply with the requirements of proxy access as set forth in the Bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company not less than 120 days nor more than 150 days prior to the anniversary of the date that the Company first mailed its proxy materials for the annual meeting of the previous year.
Although the Company does not have a formal policy on Board diversity, the Board seeks independent directors with diverse professional backgrounds who combine a broad spectrum of experience and expertise with a reputation for integrity. The Nominating/Governance Committee is committed to actively seeking women and minority candidates for the pool from which director candidates are chosen. A candidate for director should have experience in positions with a high degree of responsibility and be selected based upon contributions he or she can make to the Board and upon his or her willingness to devote adequate time and effort to Board responsibilities. In making this assessment, the Nominating/Governance Committee will consider the number of other boards on which the candidate serves and the other business and professional commitments of the candidate. The candidate should also have the ability to exercise sound business judgment to act in what he or she reasonably believes to be in the best interests of the Company and its stockholders. NoAs described above, no candidate is eligible for election or reelection as a director if at the time of such election he or she is 75 or more years of age, unless the Board affirmatively determines otherwise.
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Committees of the Board |
The Board has six standing committees: Audit, Compensation, Executive, Finance, Nominating/Governance and Public Responsibility. The Audit Committee, Compensation Committee and Nominating/Governance Committee and Public Responsibility Committee are comprised solely of independent directors. Below is aThe chart showingbelow shows the current membership of each committee and a summary of the functions performed by each committee.
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AUDIT | COMPENSATION | EXECUTIVE | FINANCE | NOMINATING/ GOVERNANCE | PUBLIC RESPONSIBILITY | ||||||||||||||||||||
Carolyn Corvi | M | M | C | ||||||||||||||||||||||
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Jane C. Garvey | C | M | M | ||||||||||||||||||||||
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Barney Harford | M | M | M | ||||||||||||||||||||||
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Michele J. Hooper* | M | M | M | ||||||||||||||||||||||
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Todd M. Insler | M | ||||||||||||||||||||||||
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Walter Isaacson | M | M | C | ||||||||||||||||||||||
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James A. C. Kennedy | C | M | |||||||||||||||||||||||
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Oscar Munoz | M | M | |||||||||||||||||||||||
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Sito J. Pantoja | M | ||||||||||||||||||||||||
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Edward | M | M | C | ||||||||||||||||||||||
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Edward L. Shapiro | M | M | M | ||||||||||||||||||||||
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David J. | C | M | M | ||||||||||||||||||||||
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James M. Whitehurst | M | ||||||||||||||||||||||||
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Audit Committee
The Audit Committee met eight times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Audit""Audit Committee Charter" under the heading "Committee Charters."Governance Documents." All of the members of the Audit Committee are independent as defined by the applicable NYSENasdaq Listing Rules and SEC standards. The Board has determined that each of the Audit Committee members is financially literate,satisfies the financial literacy requirements under the Nasdaq Listing Rules, and that each of Ms. Hooper and Messrs. Vitale, WalkerPhilip and YamaroneVitale qualifies as an "audit committee financial expert" as defined by SEC regulations.
The purpose of the Audit Committee is to: (i) oversee the accounting and financial reporting processes of the Company and the audits of the Company's financial statements; (ii) assist the Board in fulfilling its responsibility to overseeoversee: (a) the integrity of the Company's financial statements and the adequacy of the Company's system of disclosure controls and internal controls over financial reporting; (b) the Company's compliance with legal and regulatory requirements and ethical standards; (c) the independent auditors' qualifications and independence; and (d) the performance of the Company's internal audit function and independent auditors; (iii) provide an open avenue of communication between the independent auditors, the internal auditors, management and the Board; and (iv) prepare an audit committee report as required by the SEC, which is set forth in this proxy statement under "Audit Committee Report."
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In discharging its duties, the Audit Committee has the authority to conduct or authorize investigations or studies into any matters within the Audit Committee's scope of responsibilities. The Audit Committee can form and delegate authority to subcommittees. It also has the authority, without further Board approval, to obtain, at the expense of the Company, advice and assistance from internal or external legal, accounting or other advisers as it deems advisable.
Compensation Committee
The Compensation Committee met 11nine times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Compensation""Compensation Committee Charter" under the heading "Committee Charters."Governance Documents." All of the members of the Compensation Committee are independent as defined byunder the NYSE's applicable listing standards.Nasdaq Listing Rules.
The Compensation Committee is responsible for:for, among other things: (i) overseeing the administration of the Company's compensation plans (other than plans covering only directors of the Company), including the equity-based plans and executive compensation programs of the Company; (ii) discharging the Board's responsibilities relating to the performance evaluation and compensation of the Company's officers, including the Company's Chief Executive Officer; and (iii) preparing the compensation committee report required by the SEC to be included in the annual proxy statement, which is set forth in this proxy statement under "Executive Compensation—Compensation Committee Report." The Compensation Committee also is responsible for reviewing and discussing with management the Compensation Discussion and Analysis ("CD(the "CD&A"), and based on such discussions, determining whether to recommend to the Board that the CD&A be included in the Company's annual proxy statement or annual report on Form 10-K, as applicable. The Compensation Committee also reviews and makes recommendations to the Board with respect to the adoption (or submission to stockholders for approval) or amendment of such executive incentive compensation plans and all equity-based compensation plans for the Company (other than equity-based plans covering only directors of the Company). Furthermore, the Compensation Committee exercises the powers and performs the duties, if any, assigned to it from time to time under any compensation or benefit plan of the Company or any of its subsidiaries.
The Compensation Committee performs a review, at least annually, of the goals and objectives of the Company and establishes the goals and objectives for the Chief Executive Officer. In addition, the Compensation Committee annually evaluates the performance of the Chief Executive Officer, including evaluating the Chief Executive Officer's performance in light of the goals and objectives relevant to his compensation.compensation and discusses that evaluation with the Board. The Compensation Committee has the sole authority to set the Chief Executive Officer's compensation based on this evaluation and the Company's compensation philosophy. The Compensation Committee also reviews and approvesdetermines at least annually the compensation of each other executive officer of the Company. In addition to the Chief Executive Officer, the Compensation Committee oversees the annual performance evaluation process of the other executive officers of the Company.
The Compensation Committee has delegated to the Chief Executive Officer the authority to grant stock awards to eligible participants (other than executive officers of the Company), the interpretative authority under the Company's incentive compensation plans for interpretations and determinations relating to the grant of stock awards to such eligible participants and the modification of the terms of such a participant's award following termination of employment. Additionally, the Chief Executive Officer makes recommendations to the Compensation Committee regarding the compensation of the officers who report directly to him. His recommendations are based on input from the Executive Vice President, Human Resources and Labor Relations and hisher staff, and the Compensation Committee's independent compensation consultant. The Compensation Committee has the authority to review, approve and revise these recommendations as it deems appropriate.
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The Compensation Committee has the authority, in its sole discretion, to retain or obtain, at the expense of the Company, the advice of a compensation consultant, independent legal counsel or other adviser (each, a "compensation adviser"). The Compensation Committee may select a compensation adviser to the extent required by applicable NYSE rules, only after taking into consideration all factors relevant to the compensation adviser's independence from management, including the factors specified by NYSE rules.under Nasdaq Listing Rules. The Compensation Committee is directly responsible for the appointment, compensation and oversight of the work of any compensation adviser retained by the Compensation Committee. It also has the authority, without further Board approval, to obtain, at the expense of the Company, advice and assistance from internal and external legal, accounting or other advisers as it deems advisable. The Compensation Committee is responsible for determining the scope of the executive compensation services provided by any consultant, including its fees. The Compensation Committee can also form and delegate authority to subcommittees.
Role of Compensation Consultant in Determining Executive Compensation
The Compensation Committee has retained Exequity LLP ("Exequity") as its independent compensation consultant since November 2010.consultant. A representative of Exequity regularly attends Compensation Committee meetings, participates in discussions regarding executive compensation issues, and, from time to time and in connection with the setting of incentive compensation targets, makes executive compensation recommendations to the Compensation Committee based on available marketplace compensation data for U.S. peer airlines and certain non-airline companies with comparable revenue and other characteristics. Exequity reports exclusively to the Compensation Committee and does not provide any additional services to the Company other than advice to the Nominating/Governance Committee with respect to director compensation.
In November 2010, theThe Compensation Committee adoptedmaintains a conflict of interest policy governing the relationship with its compensation consultant in order to ensure objectivity and minimize the potential for conflicts of interest in the delivery of executive compensation advice. The policy establishes management's obligation to report periodically to the Compensation Committee the scope and amount of work being performed by the consultant or its affiliates for the Company. The policy also specifies that the consultant reports directly to the Compensation Committee and has direct access to the Compensation Committee through its Chairman (or in the case of services being provided to the Board, through the Chairman of the Board or, as applicable, the Lead Director). The policy prohibits the consultant from soliciting business from the Company other than work on behalf of the Compensation Committee or the Board and requires the consultant to develop policies and procedures to prevent any employee of the consultant who advises the Compensation Committee or the Board from discussing such services with other employees of the consultant who currently provide other services to the Company or who were providing other services during the prior year. The Compensation Committee has assessed the independence of Exequity pursuant to SEC rulesNasdaq Listing Rules and concluded that Exequity's work for the Compensation Committee does not raise any conflict of interest.
Executive Committee
The Executive Committee met fivefour times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Executive""Executive Committee Charter" under the heading "Committee Charters."Governance Documents." The Executive Committee is authorized to exercise all of the powers of the Board, subject to certain limitations, in the management of the business and affairs of the Company, excluding any powers granted by the Board, from time to time, to any other committee of the Board. The Executive Committee can also form and delegate authority to subcommittees.
Finance Committee
The Finance Committee met sixeight times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Finance""Finance Committee Charter" under the heading "Committee Charters."Governance Documents." The Finance Committee is responsible for, among other things: (i) reviewing financial plans and budgets and cash management policies and activities; (ii) evaluating and advising the Board on any proposed merger or
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consolidation, or any significant acquisition or disposition of assets; (iii) evaluating and advising the Board on business opportunities and financing transactions; (iv) evaluating capital structure and recommending certain proposed issuances of securities; and (v) reviewing strategies relating to financial, operating economic or hazardeconomic risk. The Finance Committee can also form and delegate authority to subcommittees.
Nominating/Governance Committee
The Nominating/Governance Committee met 14six times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Nominating/Governance"Governance Committee Charter" under the heading "Committee Charters."Governance Documents." All of the members of the Nominating/Governance Committee are independent as defined by the NYSE's applicable listing standards.Nasdaq Listing Rules.
The Nominating/Governance Committee is responsible for, among other things: (i) identifying, evaluating and recommending for nomination individuals qualified to be Board members, other than directors appointed by holders of preferred stock of the Company; (ii) developing, recommending and periodically reviewing the Company's Corporate Governance Guidelines and overseeing corporate governance matters; (iii) reviewing and overseeing the Company's succession planning process for executive officers, including the Chief Executive Officer; (iv) overseeing an annual evaluation of the Board and its committees;Board; and (v) reviewing and making recommendations to the Board with respect to director compensation. In discharging its duties, the Nominating/Governance Committee has the authority to conduct or authorize investigations into any matters within the Nominating/Governance Committee's scope of responsibilities. The Nominating/Governance Committee can form and delegate authority to subcommittees.
The Nominating/Governance Committee has the sole authority to retain and terminate any search firm to be used to identify director candidates, including sole authority to approve the search firm's fees and other terms of engagement. It also has the authority, without further Board approval, to obtain, at the expense of the Company, advice and assistance from internal or external legal, accounting or other advisers as it deems advisable.
Public Responsibility Committee
The Public Responsibility Committee met threefour times during 20152019 and has a written charter adopted by the Board, which is available on the Company's website, www.ir.united.com,ir.united.com, by following the link "Governance""Corporate Governance" and selecting "Public Responsibility"Responsibility Committee Charter" under the heading "Committee Charters."Governance Documents."
The Public Responsibility Committee is responsible for oversight of: (i) the Company's policies, positioning and practices concerning various broad public policy issues, including those that relate to safety (including workplace safety and security); environmental affairs; political and governmental policies;affairs; consumer affairs; diversity, including, without limitation, employee diversity and supplier diversity; civic activities and business practices that impact communities in which the Company does business; and charitable, political, social and educational organizations; (ii) management's identification, evaluation and monitoring of the social, political and environmental trends, issues and concerns, domestic and international, that affect or could affect the Company's reputation, business activities and performance or to which the Company could make a meaningful contribution; and (iii) the Company's general philosophy regarding diversity, including, without limitation, employee diversity and supplier diversity, as it relates to Company policies and practices.organizations. The Public Responsibility Committee can also form and delegate authority to subcommittees.
Special Committee and Subcommittee
In addition to the standing board committees, on March 2, 2015, the Board established a Special Committee that is currently comprised of Mr. Meyer (Chair), Ms. Corvi, Mr. Isaacson, Mr. Nuti, Mr. Simmons, Mr. Vitale, Mr. Walker and Mr. Yamarone. As disclosed in the first quarter of 2015, the Company and certain of its current and former executive officers and employees received federal grand jury subpoenas requesting records and testimony related to certain individuals formerly associated with the Port Authority of New York and New Jersey and related operations of the Company, and the Company is conducting an internal investigation in response. The Special Committee is overseeing this internal investigation, as well as a related investigation by the SEC. In addition, on March 2, 2015, the Special Committee formed a Subcommittee of the Special Committee, and authorized the Subcommittee to exercise certain authority of the Special Committee with respect to the investigation. The members of the Subcommittee currently are Mr. Meyer (Chair), Ms. Corvi, Mr. Walker and Mr. Vitale. Mr. Munoz served as a member of each of the Special Committee and the Subcommittee from the time of their respective formation until his appointment as President and CEO on September 8, 2015.
Compensation Committee Interlocks and Insider Participation |
The Compensation Committee is currently composed of Messrs. Walker, Isaacson, Meyer,Kennedy, Shapiro and Yamarone,Whitehurst and Ms. Hooper, each of whom is an independent, non-management director, and no member of the Compensation Committee has ever been an officer or employee of the Company or any of its subsidiaries. None of our executive officers has served as a member of any board of directors or compensation committee of any other company for which any of our directors served as an executive officer at any time
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since January 1, 2015.2019. In addition, no member of the Compensation Committee had any relationship requiring disclosure under Item 404 of Regulation S-K promulgated by the SEC.
Certain Relationships and Related Transactions |
Review, Approval or Ratification of Transactions with Related Parties
The Board recognizes that transactions involving the Company and related parties present a heightened risk of conflicts of interest. In order to ensure that the Company acts in the best interests of its stockholders, the Board has adopted a written policy for the review and approval of any Related Party Transaction (as defined below). It is the policy of the Company that any Related Party Transaction must be approved or ratified by the Audit Committee or, if the Board determines that a transaction should instead be reviewed by all of the disinterested directors on the Board, by a majority of the disinterested directors on the Board. No director is permitted to participate in the review or approval of a Related Party Transaction if such director or his or her immediate family member is a Related Party (as defined below). In reviewing a proposed transaction, the Audit Committee or the disinterested directors, as applicable, must (i) satisfy themselves that they have been fully informed as to the Related Party's relationship and interest and as to the material facts of the proposed transaction,
(ii) consider all of the relevant facts and circumstances available to them, including but not limited to: the benefits to the Company, the impact on a director's independence, the availability of other sources for comparable products or services, the terms of the transaction, and the terms available to unrelated third parties or to employees generally, and (iii) determine whether or not the proposed transaction is fair to the Company and is not inconsistent with the best interests of the Company and its stockholders.
If the Company enters into a transaction that (i) the Company was not aware constituted a Related Party Transaction at the time it was entered into but which it subsequently determines is a Related Party Transaction or (ii) did not constitute a Related Party Transaction at the time such transaction was entered into but thereafter becomes a Related Party Transaction, then in either such case the Related Party Transaction shall be presented for ratification by the Audit Committee or a majority of the disinterested directors on the Board. If such Related Party Transaction is not ratified by the Audit Committee or a majority of the disinterested directors, then the Company shall take all reasonable actions to attempt to terminate the Company's participation in the transaction.
As set forth in the policy, a "Related Party Transaction" is a transaction (including any financial transaction, arrangement or relationship (including an indebtedness or guarantee of indebtedness)), or series of similar transactions, or any material amendment to any such transaction, in which:
For purposes of this definition, a "Related Party" means (i) an executive officer of the Company, (ii) a director of the Company or nominee for director of the Company, (iii) a person (including an entity or group) known to the Company to be the beneficial owner of more than 5% of any class of the Company's voting securities, or (iv) an individual who is an immediate family member (as defined below) of an executive officer, director, nominee for director or 5% stockholder of the Company.
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30 | | | | 2020 Proxy Statement | | |
An "immediate family member" includes any child, stepchild, parent, stepparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law of such person, and any person (other than a tenant or employee) sharing such person's home.
Related Party Transactions Since January 1, 2019
The Company hasJohn Gebo, Senior Vice President, Alliances, of United Airlines, is the spouse of Kate Gebo, Executive Vice President, Human Resources and Labor Relations, of the Company. For 2019, Mr. Gebo received aggregate cash compensation of approximately $937,976, consisting of base salary, annual incentive bonus and excess 401(k) cash direct and cash match program payments for management and administrative employees; equity compensation, consisting of restricted stock unit awards with an aggregate grant date fair value of approximately $322,719; and other customary officer and employee benefits. Mr. Gebo and Ms. Gebo do not entered into any Related Party Transactions (as defined above) since January 1, 2015.report to, or determine the compensation of, each other.
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| | 2020 Proxy Statement | | | | 31 |
BENEFICIAL OWNERSHIP OF SECURITIES
Beneficial Ownership of Securities |
Certain Beneficial Owners |
The following table shows the number of shares of our voting securities owned by any person or group known to us, as of April 28, 2016,1, 2020, to be the beneficial owner of more than 5% of any class of our voting securities.
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Ownership | Percent of Class(1) | ||||||
---|---|---|---|---|---|---|---|---|---|
The Vanguard Group(2) | Common Stock | 26,272,623 | 6.87 | % | |||||
100 Vanguard Blvd. | |||||||||
Malvern, PA 19355 | |||||||||
Blackrock Inc.(3) | Common Stock | 24,866,767 | 6.7 | % | |||||
55 East 52nd Street | |||||||||
New York, NY 10055 | |||||||||
PRIMECAP Management Company(4) | Common Stock | 19,466,000 | 5.22 | % | |||||
225 South Lake Ave. #400 | |||||||||
Pasadena, CA 91101 | |||||||||
United Airlines Pilots Master Executive Council, Air Line Pilots Association, International(5) | Class Pilot MEC Junior | 1 | 100 | % | |||||
9550 West Higgins Road, Suite 1000 | Preferred Stock | ||||||||
Rosemont, IL 60018 | |||||||||
International Association of Machinists and Aerospace Workers(5) | Class IAM Junior | 1 | 100 | % | |||||
District #141 | Preferred Stock | ||||||||
900 Machinists Place | |||||||||
Upper Marlboro, MD 20722 |
| | | | | | |
Name and Address of Beneficial Owner | Title of Class | Amount and Nature of Ownership | Percent of Class(1) | |||
PRIMECAP Management Company(2) | Common Stock | 37,164,507 | 15.0% | |||
177 E. Colorado Blvd., 11th Floor | ||||||
Pasadena, CA 91105 | ||||||
| | | | | | |
Berkshire Hathaway Inc.(3) | Common Stock | 21,938,642 | 8.9% | |||
3555 Farnam Street | ||||||
Omaha, NE 68131 | ||||||
| | | | | | |
The Vanguard Group(4) | Common Stock | 20,252,121 | 8.2% | |||
100 Vanguard Blvd. | ||||||
Malvern, PA 19355 | ||||||
| | | | | | |
BlackRock, Inc.(5) | Common Stock | 14,918,558 | 6.0% | |||
55 East 52nd Street | ||||||
New York, NY 10055 | ||||||
| | | | | | |
PAR Investment Partners, L.P.(6) | Common Stock | 14,096,389 | 5.7% | |||
200 Clarendon Street, 48th Floor | ||||||
Boston, MA 02116 | ||||||
| | | | | | |
United Airlines Pilots Master Executive Council, Air Line Pilots Association, International(7) | Class Pilot MEC Junior Preferred Stock | 1 | 100% | |||
9550 West Higgins Road, Suite 1000 | ||||||
Rosemont, IL 60018 | ||||||
| | | | | | |
International Association of Machinists and Aerospace Workers(7) | Class IAM Junior Preferred Stock | 1 | 100% | |||
District #141 | ||||||
900 Machinists Place | ||||||
Upper Marlboro, MD 20722 | ||||||
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32 | | | | 2020 Proxy Statement | | |
power for 274,501 shares, shared voting power for 14,978 shares, sole dispositive power for 19,967,924 shares and shared dispositive power for 284,197 shares.
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| | 2020 Proxy Statement | | | | 33 |
Directors and Executive OfficersTable of Contents
Directors and Executive Officers |
The following table shows the number of shares of our voting securities owned by our directors, director nominees, the named executive officers identified in this proxy statement (including two executive officers who have departed from the Company),and all our directors, and director nominees and all of our directors and executive officers as a group as of April 28, 2016.1, 2020. The person or entitiespersons listed below have sole voting and investment
power with respect to all shares of our Common Stock beneficially owned by them, except to the extent this power may be shared with a spouse.spouse, or as otherwise described in the footnotes following the table.
Name of Beneficial Owner | Title of Class | Amount and Nature of Ownership | Percent of Class | ||||||
---|---|---|---|---|---|---|---|---|---|
Directors | |||||||||
Carolyn Corvi | Common Stock | 15,041 | (2)(3) | * | |||||
Jane C. Garvey | Common Stock | 3,788 | (2) | * | |||||
Barney Harford | Common Stock | 100,000 | * | ||||||
Todd M. Insler | Common Stock | 0 | * | ||||||
Walter Isaacson | Common Stock | 7,638 | (2) | * | |||||
James A.C. Kennedy | Common Stock | 2,900 | * | ||||||
Henry L. Meyer III | Common Stock | 36,853 | (2)(4) | * | |||||
Robert A. Milton | Common Stock | 1,000 | * | ||||||
Oscar Munoz(1) | Common Stock | 191,105 | (2)(4) | * | |||||
William R. Nuti | Common Stock | 2,638 | (2) | * | |||||
Sito Pantoja | Common Stock | 0 | * | ||||||
Edward L. Shapiro(5) | Common Stock | 0 | * | ||||||
Laurence E. Simmons | Common Stock | 18,189 | (2)(6) | * | |||||
David J. Vitale | Common Stock | 12,638 | (2) | * | |||||
John H. Walker | Common Stock | 8,638 | (2) | * | |||||
James M. Whitehurst | Common Stock | 10,000 | * | ||||||
Charles A. Yamarone | Common Stock | 17,402 | (2)(7) | * | |||||
Named Executive Officers | * | ||||||||
Michael P. Bonds | Common Stock | 52,865 | * | ||||||
James E. Compton | Common Stock | 74,556 | * | ||||||
Brett J. Hart(8) | Common Stock | 59,579 | * | ||||||
Gregory L. Hart | Common Stock | 36,466 | * | ||||||
Gerald Laderman | Common Stock | 40,774 | * | ||||||
John D. Rainey(9) | Common Stock | 64,934 | * | ||||||
Jeffery A. Smisek(10) | Common Stock | 490,030 | * | ||||||
Directors and Executive Officers as a Group (26 persons) | Common Stock | 1,295,182 | * |
| | | | | | | |||
Name of Beneficial Owner | Title of Class | Amount and Nature of Ownership | Percent of Class | ||||||
Directors | | | | | | ||||
| | | | | | | |||
Carolyn Corvi | | Common Stock | | | 15,802 | (1) | | * | |
| | | | | | | |||
Jane C. Garvey | | Common Stock | | | 9,929 | (2) | | * | |
| | | | | | | |||
Barney Harford | | Common Stock | | | 104,542 | (1) | | * | |
| | | | | | | |||
Michele J. Hooper | | Common Stock | | | 3,245 | (2) | | * | |
| | | | | | | |||
Todd M. Insler | | Common Stock | | | — | | | * | |
| | | | | | | |||
Walter Isaacson | | Common Stock | | | 19,078 | (2) | | * | |
| | | | | | | |||
James A. C. Kennedy | | Common Stock | | | 8,796 | (1) | | * | |
| | | | | | | |||
Oscar Munoz(3) | | Common Stock | | | 250,940 | | | * | |
| | | | | | | |||
Sito J. Pantoja | | Common Stock | | | — | | | * | |
| | | | | | | |||
Edward M. Philip | | Common Stock | | | 7,207 | (2)(4) | | * | |
| | | | | | | |||
Edward L. Shapiro | | Common Stock | | | 195,231 | (2) | | * | |
| | | | | | | |||
David J. Vitale | | Common Stock | | | 18,534 | (1) | | * | |
| | | | | | | |||
James M. Whitehurst | | Common Stock | | | 18,262 | (2) | | * | |
| | | | | | | |||
Named Executive Officers | | | | | | ||||
| | | | | | | |||
Brett J. Hart | | Common Stock | | | 83,780 | | | * | |
| | | | | | | |||
Gregory L. Hart | | Common Stock | | | 26,943 | | | * | |
| | | | | | | |||
J. Scott Kirby(5) | | Common Stock | | | 312,152 | (6) | | * | |
| | | | | | | |||
Gerald Laderman | | Common Stock | | | 63,205 | | | * | |
| | | | | | | |||
Directors, Director Nominees and Executive Officers as a Group (21 persons) | | Common Stock | | | 1,240,170 | | | * | |
| | | | | | |
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34 | | | | 2020 Proxy Statement | | |
Table of deferred stock units within 60 days following April 28, 2016.Contents
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), requires our directors, executive officers and holders of more than 10% of our Common Stock to file with the SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities. Such executive officers, directors and beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms filed by such reporting persons. Based solely on a review of such reports filed by or on behalf of such persons in this regard and written representations from them, all Section 16(a) reporting requirements were timely fulfilled during 2015.
The following table sets forth information as of December 31, 20152019 regarding the number of shares of our Common Stock that may be issued under the Company's equity compensation plans.
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||||
---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by security holders | ||||||||||
Options | 245,999 | $ | 29.52 | |||||||
Restricted Stock Units | 2,612,228 | — | ||||||||
| | | | | | | | | | |
Subtotal | 2,858,227 | (1) | $ | 2.54 | 4,298,835 | (2) | ||||
Equity compensation plans not approved by security holders | 78,750 | (3) | $ | 18.32 | 3,315,007 | (4) | ||||
| | | | | | | | | | |
Total | 2,936,977 | $ | 2.96 | 7,613,842 | ||||||
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | | |
| | | | | | | | | ||||
Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column) | |||||||||
Equity compensation plans approved by security holders | | | | | | |||||||
| | | | | | | | | ||||
Options | | 689,200 | | $82.12 | | | | |||||
| | | | | | | | | ||||
Restricted Stock Units | | 1,967,250 | | — | | | | |||||
| | | | | | | | | ||||
Subtotal | | 2,656,450 | | $21.31 | | 8,371,140 | (1) | | ||||
| | | | | | | | | ||||
Equity compensation plans not approved by security holders | | — | | — | | — | | | ||||
| | | | | | | | | ||||
Total | | 2,656,450 | | $21.31 | | 8,371,140 | | | ||||
| | | | | | | | |
Note 5—Share-Based Compensation Plans of the Combined Notes to the Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" in the 2015 Form 10-K.
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| | 2020 Proxy Statement | | | | 35 |
The Incentive Plan 2010 was adopted by the board of directors of Continental in December 2009 and approved by Continental stockholders in 2010, and was assumed by the Company in connection with the Merger on October 1, 2010. Stock options outstanding prior to the Merger that remain outstanding will vest on their original vesting schedule. The Incentive Plan 2010 provides for the grant of non-qualified stock options, incentive stock options, stock appreciation rights ("SARs"), restricted stock awards, performance awards, incentive awards and other stock awards. Employees who were employed by United Air Lines prior to the Merger closing date are not eligible to receive grants of equity-based awards under the Incentive Plan 2010.
The Incentive Plan 2010 is administered by the Compensation Committee with respect to awards made to persons subject to Section 16 of the Exchange Act, and by the Compensation Committee or the Chief Executive Officer with respect to awards made to persons who are not subject to Section 16 of the Exchange Act, unless the Incentive Plan 2010 otherwise specifies that the Compensation Committee will take specific action or the Compensation Committee specifies that it will serve as administrator.
Subject to adjustment for changes in capitalization, the aggregate number of shares which may be granted under the Incentive Plan 2010 is not to exceed 3,937,500 shares (which reflects the adjustment based on the exchange ratio that applied in connection with the Merger). To the extent that an award lapses, is terminated or is forfeited, or an award is paid in cash such that all or some of the shares of Common Stock covered by the award are not issued to the holder, any such forfeited or unissued shares of Common Stock then subject to such award will be added back to the number of shares available for issuance under the Incentive Plan 2010. No awards may be granted under the Incentive Plan 2010 after November 30, 2019.
The exercise price for all stock options and SARs under the Incentive Plan 2010 may not be less than the fair market value of a share of Common Stock on the date of grant. Stock options and SARs may not be exercisable after the expiration of 10 years following the date of grant. Performance awards and incentive awards may be granted in the form of restricted stock units or such other form as determined by the plan administrator.
Vesting and exercisability of awards may be based on continued employment, the satisfaction of certain performance measures, such other factors as the administrator may determine or a combination of such factors. Awards granted under the Incentive Plan 2010 that vest based solely on the continued employment of the holder may not become exercisable or vest in full in less than three years from the date of grant, and awards that are based on the satisfaction of performance measures are subject to a minimum waiting period for vesting or exercise of one year from the date of grant. However, awards that have conditions related to both time and performance measures may vest or become exercisable
upon the earlier satisfaction of the performance measures, subject to the one-year waiting period. The exercisability and vesting requirements set forth above are not applicable to: (i) acceleration of exercisability or vesting upon the death, disability or retirement of the holder and upon certain other terminations as provided pursuant to any employment agreement entered into prior to December 1, 2009; (ii) acceleration of exercisability or vesting upon a change in control or certain other corporate changes affecting the Company; and (iii) grants of awards made in payment of other earned cash-based incentive compensation. In addition, the plan administrator has the discretion to grant an award that does not contain the minimum exercisability and vesting requirements provided that the aggregate number of shares that may be subject to such awards may not exceed 5% of the aggregate maximum number of shares that may be issued pursuant to the plan.
Executive Compensation |
Compensation Discussion and Analysis |
Compensation Discussion and Analysis
United. Together.
Executive Summary
2015 Results. We are proud of our performance in 2019. We reached our 2020 goal—first announced in January 2018—to achieve adjusted diluted earnings per share ("EPS")(1) in the range of $11 to $13 a full year ahead of schedule. The Company achieved full year 2019 diluted EPS of $11.58 and adjusted diluted EPS(1) of $12.05. The Company also achieved full year 2019 pre-tax margin growth of 2.6 percentage points compared to full year 2018. This pre-tax margin growth outpaced our largest competitors. Operationally, United was number one in on-time departures at our hubs in Chicago, Denver and Los Angeles. And throughout 2019, our approximately 100,000 employees continued to drive customer service by embracing our core4 service decision framework principles of Safe, Caring, Dependable and Efficient.
Similar to prior years, financial, operational and customer-centric performance measures were the key elements of our 2019 executive compensation program design. In 2019, we focused on making United Airlines the best airline for our customers, employeescommitment to caring customer service that provides a warm and shareholders. Below are certain 2015welcoming travel experience. In addition to our customer-focused initiatives, our 2019 incentive design included focus on our financial and operational highlights, including an explanation of linkages to our compensation programs, and a discussion of some of our recent initiatives and accomplishments.
As we started 2020, our United team was building on the momentum generated in 2019 and focused on the continued execution of our long-term incentivemulti-year growth strategy, running a great operation and becoming the airline that customers choose to fly. However, the onset of the COVID-19 pandemic and the resulting significant decline in demand for air travel required that we quickly shift our focus from our strategic plan for 2020 to managing this crisis. As always, safety comes first at United, and the safety of our customers and employees remains our top priority. We continue to work closely with federal agencies and global health organizations to share information and ensure we are doing what we can to promote a safe and healthy environment in our facilities and on our aircraft. In response to the impact of COVID-19, we are proactively evaluating and cancelling flights on a rolling 90 day basis until we see signs of a recovery in demand, and are taking steps to improve our financial position in light of reduced demand. From a financial perspective, we have reduced our capital expenditures and operating expenditures, suspended share buybacks under our share repurchase program, entered into $2.75 billion in secured term loan facilities and taken a number of human capital management actions, among other items. In recognition of the impact of COVID-19 on United's business and to lead by example, Oscar Munoz, our Chief Executive Officer, and J. Scott Kirby, our President, have waived 100% of their respective base salaries from March 10 through at least June 30, 2020, all officers of the Company and United Airlines have temporarily waived 50% of their base salaries and our non-employee directors have waived 100% of their cash compensation granted in 2015 for the 2015-2017 performance period are insecond and third quarters of 2020.
We look forward to a time when this public health crisis is behind us, economic recovery is underway and demand for air travel returns. When this happens, we believe that our United team will be prepared to pick up where we left off and ready to fulfill the form of Performance-Based RSU awards or restricted shares and thus are directly linked to our stock price performance. Allgreat potential of our long-term incentives have three-year performance periods.
(1)
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36 | | | | 2020 Proxy Statement | | |
Named Executive Officers |
This proxy statement provides compensation information regarding the Company's principal executive officer (our CEO), the Company's principal financial officer (our CFO), and the three other most highly compensated executive officers in 2019 determined in accordance with applicable SEC disclosure rules. This CD&A section describes the 2019 compensation elements and decisions related to these "named executive officers" or "NEOs." Our 2019 named executive officers were:
Notable 2015 Events. Many of the items discussed in our CD&A and the related executive compensation disclosures are comparable to our discussion related to 2014 given that our compensation elements remain largely similar year-over-year to those that we first implemented post-Merger in 2011. The Company also welcomed our new CEO in September 2015. Our 2015 CD&A and the related tabular disclosures reflect the change in our leadership team during 2015. Items of note to assist with an understanding of our discussion and disclosures regarding our 2015 executive compensation program include the following:
responsibility for managing all aspects of CSX's operations across its 21,000-mile network, including transportation, service design, customer service, engineering, mechanical and technology. In this role, Mr. Munoz also oversaw sales and marketing, human resources, and information technology. Immediately prior to this role, Mr. Munoz served as Executive Vice President and Chief Operating Officer of CSX. Mr. Munoz also previously served asGerald Laderman, Executive Vice President and Chief Financial Officer of CSX, with responsibility for management and oversight of all financial, strategic planning, information technology, purchasing and real estate activities of CSX. In addition, he developed extensive experience in the airline industry during his six years of service on the Continental board of directors prior to the Merger and has continued to serve on our Board since the Merger. Please see the "CEO Agreements" section below for a discussion of the agreement entered into with Mr. Munoz relating to his employment with the Company.
Executive Summary |
Below is a summary of our executive compensation philosophy; our 2019 incentive compensation design; certain 2019 Company highlights that are linked to our incentive compensation programs; and our consideration of our prior stockholder say-on-pay vote.
Executive Compensation Philosophy. A number of the 2015 financial and operational highlights are directly tied to performance under ourOur core executive compensation program awards, and specific links to our awards are noted above. Our compensation philosophy continues to be based on achieving the following objectives:
We believe that the foregoing objectives are reflected in the 2019 incentive compensation program design approved by the Compensation Committee (the "Committee") in February 2019 and summarized further below.
2019 Incentive Compensation Design. In designing the Annual Incentive Program ("AIP") for 2019, the Committee focused on 2019 performance measures linked to our financial results, operational performance and customer service. As in prior years,pre-tax income represented the largest percentage of the 2019 AIP opportunity. The 2015 executive compensation programs were designed to directly link compensation opportunities2019 AIP awards also utilized three other performance measures linked to the financialsatisfaction of our customers throughout their travel experience with United:on-time departures;customer satisfaction ("CSAT") surveys; andnet promoter score ("NPS") results.
Our 2019 AIP awards measured our operational performance metricsbased on our monthly on-time departures, or D:00 performance, relative to industry peers. D:00 performance was utilized because our on-time departure results are strongly correlated to the satisfaction of our customers. In 2019, a single operational measure was selected (eliminating the completion factor and baggage delivery measures used in
(2) In December 2019, the Company announced that we believeMr. Munoz will transition from the role of Chief Executive Officer of the Company following the Annual Meeting and will assume the role of Executive Chairman of the Board, and Mr. Kirby will assume the role of CEO at such time. See "—CEO Transition Arrangements" below.
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| | 2020 Proxy Statement | | | | 37 |
prior years) to simplify the design and to narrow focus on the operational performance measure that was viewed as having the closest link to customer satisfaction. Another portion of the 2019 AIP award opportunity was linked to United customer satisfaction based on survey results, with Committee discretion to also consider other factors, including third party surveys and rankings of customer satisfaction within the airline industry. The final portion of the 2019 AIP award was a new performance measure based on our monthly NPS results as reflected in internal surveys. Management and the Committee are appropriate measuresenthusiastic about the NPS performance metric, which provides focus on earning customer loyalty over time and goes beyond measuring a customer's satisfaction on a particular flight to measuring how customers feel about United. The individual performance modifier was retained in the 2019 AIP design to maintain emphasis on the performance contributions of success ineach individual. With respect to the 2019 long-term incentive program design, the Company retained focus on our business: annual pre-tax income, long-term pre-tax margin performance improvement relative to our industry peers. In 2019, the Committee specified that all 2019 long-term incentive awards, including both the performance-based and time-based awards, would be stock-settled.
Certain 2019 Incentive Program and Company Highlights. Below are highlights related to our incentive program design, Company performance, our efforts toward consistently delivering the high-quality travel experience our customers expect and achieving corporate social responsibility leadership.
We proactively assess risks to our airline operations to enhance the safety of our employees, our customers and our aircraft. We fulfill our safety commitment through United's safety management system ("SMS"), which is a comprehensive, formalized approach to managing the safety of everyone at United. Every day, through our SMS, we seek to manage risk and achieve the highest level of safety performance throughout the Company. The SMS is a regulatory requirement that helps ensure we are safer by committing to safety standards, by communicating across divisions and departments, through hazard identification and mitigation, and by confirming that our mitigations are working properly. We also focus on measuring our safety record across numerous metrics.
(3) See Appendix A for a reconciliation of pre-tax income as measured for purposes of the 2019 AIP to GAAP pre-tax income.
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38 | | | | 2020 Proxy Statement | | |
Our revenue for 2019 increased $2.0 billion year-over-year due to a 3.5% growth in available seat miles and an increase in passenger revenue per available seat mile of 1.5% in 2019 as compared to 2018.
In 2019, we achieved #1 D:00 at all our hubs in Chicago, Denver and Los Angeles. We are proud of our 2019 operational results when compared to competitors by location. Based on inherent limitations of performance comparisons based on relative system-wide D:00 results, the Company's 2020 AIP awards will measure D:00 performance on a location basis, which was designed so that the relative performance comparison would reward success in responding to location specific challenges, such as local airport capacity limitations, infrastructure, the air traffic control environment and weather events.
In 2019, we flew the most revenue passengers in Company history and we set a Company record for the most mainline departures, with more than 800,000.
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| | 2020 Proxy Statement | | | | 39 |
In 2019, the Company continued its commitment to its customers, looking at every aspect of our business to ensure that we keep customers' best interests at the heart of our service. During 2019, we hosted all 25,000 of our Flight Attendants at a two-day "Backstage" event where we shared customer satisfaction.insights and Company strategy. Other 2019 customer initiatives included successful implementation of our ConnectionSaver tool, which improves the travel experience for customers with connecting flights, expanded on-board travel amenities, and positive changes to our MileagePlus rewards program.
Consideration of Prior Say-on-Pay Vote. A key objective of our executive compensation programprograms is linking the interests of our executives with the interests of our stockholders, and we place emphasis on maintaining an executive compensation programprograms that addresses and satisfiesaddress the key concerns of our stockholders. Our "say-on-pay" proposal received approximately 98%96% approval from our stockholders at our 20152019 annual stockholder meeting.meeting of stockholders. The Committee considers this voting result to be a strong
an endorsement of our executive pay programs and has not made any changes to the executive compensation program based onprograms directly in response to the results of the 20152019 say-on-pay vote. The
Exequity provides the Committee considers stockholder interests and concerns relating to executive pay as it designs ourwith regular updates on trends in executive compensation program and implements specific compensation elements that represent what it believes to be best practices.matters. The Compensation Committee will continue to consider emerging compensation practices and stockholder feedback, including say-on-pay voting results, as part of its decision-making process.
Tight Linkage between Performance and Executive Pay
Tight Linkage between Performance and Executive Pay |
The compensation opportunities of our executives are directly tied to the performance of the Company as outlined below. The charts below show the allocation of2019 targeted pay across base salary, annual incentives, and long-term incentives as approved (i) for Mr. Munoz pursuant to his employment agreement, (ii) for Mr. Smisek with respect to his 2015 targeted compensation level (which were unchanged from 2014 levels), and (iii) for the remainingother named executive officers with respect to their 2015 targeted compensation levels. For Mr. Munoz, the chart below includes the 2016 targeted pay, as reflected in his employment agreement, and excludes the one-time sign-on bonus and initial equity grant, as discussed below.officers. As reflected in the charts below, the percentages of our named executive officers' target annual compensation represented by annual and long-term incentives that are linked to Company performance and stock price are as follows:approximately 91% for Mr. Munoz; 93% for Mr. Smisek;Munoz and an average of approximately 77%85% for our remainingother named executive officers.
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40 | | | | 2020 Proxy Statement | | |
CEO 2019 Target Compensation Table and is subject to repayment if Mr. Munoz is terminated for cause or resigns without good reason prior to the one-year anniversary of his commencement date.
Chart
Other NEO's 2019 Target Compensation Chart *
a limited duration. The 2015 special monthly stipends for Messrs. B. Hart and Laderman are included in the Bonus column of the 2015 Summary Compensation Table.
We believe that the charts above demonstrate our pay-for-performance philosophy, as a significant portion of the targeted 2019 compensation opportunities for our executives are in the form of variable pay that is directly tiedlinked to Company performance.performance over time. Specifically:
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Our Executive Compensation Governance Practices
Our 2019 Executive Compensation Governance Practices |
Our 2019 executive compensation policies and practices include the following features, which we believe illustrate our commitment to corporate governance "best practices" and the program principles stated above:
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purposes was carefully selected to include well-run companies in general industry, with a primary focus on airlines, customer service-oriented companies in the travel industry, aerospace and transportation companies; companies of similar revenue size (i.e., 0.5-2.0 times UAL'sthe Company's revenue); and the largest U.S.-based airlines (regardless of revenue range).
A newly hired or promoted officer has five years to achieve the stock ownership targets set forth in the guidelines.
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Table of inappropriate behavior.Contents
Philosophy and Objectives of Our Executive Compensation Program for 2015
Philosophy and Objectives of Our 2019 Executive Compensation Program |
Aligning the interests of our stockholders and executives.officers. Our 2015The elements of our 2019 executive compensation program elements were designed to be aligned with the interests of our stockholders by linking our incentive compensation performance metrics to the following key indicators of the Company'sfinancial performance: annualperformance, including our adjusted pre-tax income;income (60% of the total target opportunity of our 2019 AIP awards) and our long-term pre-tax margin performance improvement relative to our industry peers; and our level of ROIC achievement. All of the valuepeers (50% of our 20152019 long-term incentive awards). Other metrics in the incentive program are linked tocustomer satisfaction, which we believe drives shareholder value over the long-term. All our 2019 long-term incentive awards isare in the form of either Performance-Based RSUs or restricted share awards,time-based RSUs, both of which were structured as stock-settled awards and provide a direct link to our stock value.
Table of Contentsprice.
Furthermore, we believe that our executivesofficers should have a meaningful financial stake in our long-term success. As described in greater detail below, the Compensation Committee adoptedOur stock ownership guidelines in 2011 that require covered executive officers, including the named executiveeach of our officers to maintain a stakehold stock in the long-term successCompany that is based on a multiple of our business.the officer's base salary. We also have a claw-back policy that provides for recoupment of incentive compensation in specified circumstances. See "Other Executive Compensation Matters—Stock Ownership Guidelines" and "—Recoupment of Earned Awards/"Claw-back" Policy." In addition, the Company's Securities Trading Policy prohibits speculative and derivative trading and short selling with respect to our securities by all officers. The policy further prohibits pledging Company securities and hedging transactions with respect to Company securities. We believe these requirements, coupled with our long-term incentive program, effectively align the interests of our executivesofficers with those of our stockholders and motivate the creation of long-term stockholder value.
Our broad-based employee incentive opportunities also are designed to further our objective of aligning the interests of our employees with those of our stockholders and customers. Our profit sharing plans provide eligible employees with incentives that are aligned with the interests of our stockholders through payout opportunities based on our annual pre-tax profit. The Company also rewards employees with an on-time arrivalAs noted further below, our annual incentive program, a perfect attendance program, and incentivesawards to officers reward results linked to the operational performance measure that is a leading indicator of customer satisfaction survey results. The 2015 Annual Incentive Program awards to executives also set 20% of the target opportunityand provide incentives based on improvement indirect surveys of customer satisfaction surveyand net promoter scores. Eligible employees are also rewarded with incentives based on operational performance and direct customer satisfaction measures.We believe that these programs ensure a focus on operational performance that aligns employee pay with customer satisfaction, enhances our product, and ultimately drives financial performance.
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Linking executive pay to performance. The 2015 awards to our executives are directly tied to the financial performance metrics that we believe are appropriate measures of success in our business: annual pre-tax income; long-term pre-tax margin performance improvement relative to our industry peers; and our absolute ROIC performance. In addition, all of the targeted value of our 2015 long-term incentive awards is tied to our stock price performance. We believe our compensation programs create strong incentives to align our executives'management's performance to the successful execution of our strategic plan as well as longer term shareholderstockholder value creation. As in prior years, adjusted pre-tax income represented the largest percentage of the 2019 AIP opportunity (60% of the target opportunity). The 2019 AIP awards also utilized three other performance measures, each of which is directly or indirectly linked to the satisfaction of our customers throughout their travel experience with United: operational performance based on our monthly D:00 performance relative to industry peers (15% of the target opportunity); United customer survey results (15% of the target opportunity); and NPS survey results (10% of the target opportunity). The 2019 long-term incentive structure is equally divided between relative pre-tax margin performance-based awards and time-vested awards. The 2019 performance-based awards are tied to our pre-tax margin performance improvement measured on a relative basis versus our industry peers. Our long-term incentive design includes stability and retentive features provided by the time-vested awards while delivering a significant portion of the target value in the form of at-risk compensation. All the 2019 long-term incentive awards will be settled in Common Stock.
Attracting, retaining and appropriately rewarding our executivesmanagement in line with market practices. We seek to continue to attract world-class executives and to retain our existing executives primarily by setting our compensation and benefits at competitive levels relative to companies of similar size, scope and complexity. Because we believe that our senior executives havemanagement team has skills that are transferrable across industries, and because we recruit for talent both within the airline industry and also from a broad spectrum of leading businesses, we compare the overall compensation levels of our executivesofficers with the compensation provided to executivesofficers of a benchmarking peer group, as discussed in further detail in "Compensation Process and Oversight—Benchmarking" below. Compensation decisions are also considered and balanced in light of an executive's responsibility level withinlevels and value added to the organization. In prior years, including 2015,
The Committee places a strong emphasis on reviewing and, as appropriate, adjusting executive officer compensation packages based on market conditions and other factors specific to the individual. Internal pay parity also continues to be an important factor in setting officer compensation, particularly incentive target percentage opportunity levels. The 2019 AIP awards include an individual performance modifier to allow the Committee has emphasized a concern for internal pay equity.to provide greater rewards and accountability based on individual performance. Compensation and promotion opportunities also take into account each executive'sindividual's unique skills and capabilities, long-term leadership potential, performance and historic pay levels, and the overall scope of responsibilities.
Compensation Process and Oversight |
The Committee maintains a chart of work that outlines the executive's responsibilities. With regardannual calendar of activities to Mr. Munoz, consideration included his compensation at his prior employer, including forfeited compensation. In response to encouragement from Mr. Munoz,implement the Committee's responsibilities set forth in the Committee is evaluating methods for providing greater reward opportunitycharter. The Committee executes its responsibilities, including actions related to compensation of the named executive officers, with guidance from an independent compensation consultant and accountability based on individualanalysis and support provided by management. The narrative below describes the processes related to executive compensation matters.The Committee makes all final decisions regarding the executive compensation program design, performance goals, and contributions tothe compensation levels of the Company's success.
Compensation Processexecutive officers following its review and Oversightconsideration of all recommendations and data it deems appropriate.
Independent Compensation Committee Role and Management Participation in Setting Executive Compensation.Consultant. Except as noted below regarding Mr. Laderman, all 2015During 2019, final executive compensation decisions with respect to the named executive officers including final decisions regarding performance goals, salary levels and annual incentive award opportunity levels, were made by the Compensation Committee with input from Exequity, the Committee's independent compensation consultant. In 2015, Exequity assisted the Committee in reviewing the CEO compensation package for Mr. Munoz and the compensation for
Messrs. B. Hart and Laderman in their roles as acting CEO and acting CFO, respectively. This review included consideration of Mr. Munoz's compensation at his prior employer, including forfeited compensation and prospective compensation opportunities, and benchmark comparisons related to the Company's peer group. Prior to Mr. Laderman's assumption of the acting CFO role, his 2015 salary level was established and his 2015 incentive awards were granted by Mr. Smisek in his role as the CEO-administrator under the Company's officer incentive programs for persons who are not subject to Section 16 reporting.
Exequity provides the Compensation Committee with background materials, including preparation of the benchmarking study described below, and participates in Committee meetings to support the Committee's executive compensation decision-making process and to respond to questions. Exequity also assists the Committee in performing an annual compensation risk assessment of the Company's compensation programs. The Compensation Committee retained Exequity as its independent compensation consultant in October 2010. Exequity reports directly to the Committee, and the Committee has the sole authority to retain and terminate Exequity and to review and approve Exequity's fees and other retention terms. The Committee has adopted an "Independent Executive Compensation Consultant Conflict
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of Interest Policy" pursuant to which Exequity is required to provide the Committee with regular reports on any work that it performs for the Company. During 2015,2019, Exequity did not perform any work on behalf of the Company other than the executive compensation services provided to the Committee and Boarddirector compensation servicesadvice provided to the Nominating/Governance Committee. For additional information concerning the Compensation Committee, including its authority and the independent compensation consultant policy, see "Committees"Corporate Governance—Committees of the Board—Compensation Committee" above.
The Committee also receiveshas assessed the independence of Exequity pursuant to SEC rules and concluded that Exequity's work for the Committee does not raise any conflicts of interest.
Management Analysis and Support. The CEO attends Committee meetings and provides input to the Committee with respect to compensation of the management team other than himself, including input and recommendations regarding annual executive compensation decisions from management.individual performance assessments with respect to payments under the AIP. The Company's Executive Vice President, Human Resources & Labor Relations and members of histhe human resources team prepare background and supporting materials for Committee meetings. The CEO attends Compensation Committee meetings andAs appropriate, the Committee solicits input from the CEO with respect to compensation of the management team other than the CEO. The CFO and other members of the Company's financial planning and analysis groupmanagement team participate in discussions with the Committee relating to the Company's financial plan, customer centricity initiatives and results, operational performance, strategic initiatives, and proposed performance goals under the executive compensation program, and membersprogram. Members of the Company's internal audit group provide special reports to the Committee outlining the review of procedures and calculations relating to the degree of achievement of performance goals and payout of incentives.incentives for completed performance periods. Management's annual planning process involves preparation of annual financial forecasts, capital expenditure budgets, and the Company's annual business plan. Based on the Company's 20152019 planning process and the financial budget approved by the Board, management developed and proposed performance targets under the 20152019 incentive compensation programs. TheseExequity reviewed these proposals were evaluated by Exequity, in light of compensation trends, benchmarking and compensation risk factors. factors and provided guidance to the Committee.The Committee establishedmade all final decisions regarding the 2019 executive compensation program design, performance goals, and the compensation arrangementslevels of the Company's executive officers, including base salary and incentive award opportunities, following its review and consideration of all recommendations and data it deemed appropriate. The Committee regularly holds executive sessions to discuss executive compensation practices without members of management present.
Benchmarking. We recruit and we compete to retain executives not only from within the airline industry, but also from across a broad spectrum of leading businesses. In makingpreparation for the Committee's annual compensation decisions, we examine the practicesdecision process, Exequity conducts an analysis of United's compensation levels in comparison to pay levels among companies in a general comparatorcustom peer group that is representativeto help identify the competitive positioning of the size (in revenue), scopeUnited's executive pay. The analysis covers United's Section 16 reporting officers and complexity of the Company's global business operations,compares United's positions to peer company benchmarks in terms of: base pay; target annual bonus opportunity; target total cash (base pay plus target annual incentive); long-term incentives; and that includes the largest U.S.-based airline companies (regardless of revenue range)target total direct compensation (target cash plus long-term incentives).
The Committee believes that the airline industry does not have enough relevant industrysize-relevant peers given UAL's current size, to establishidentify reliable ranges of competitive market pay for our top executive talent. Accordingly, our benchmarking peer group represents a cross sectioncross-section of the relevant airline
peers and comparably sized companies in general industry that the Committee believes are representative of the competitive talent market.market for United. Where relevant and reliable pay information is available from operationally comparable airline companies beyond the primary airline peers included in the overall peer group, we reference that information in addition to the pay information for the full peer set. The following primary factors are considered in identifying the most appropriate peer companies that are size-relevant (generally 0.5x-2.0x the Company's revenue) for compensation benchmarking purposes: the labor market for United's executive talent, including a focus on geographic proximity; well-run companies in general industry, with a primary focus on airlines, aerospace and transportation companies; companies of similar revenue size (i.e., 0.5-2.0 times the Company's revenues); talent competitors within the Company's geography; and the largest U.S.-based airlines (regardless of revenue range).that are the most relevant competitors for executive talent (American, Delta, and Southwest), other transportation companies, non-airline travel companies with a customer-centric dynamic, and aerospace and defense companies. Using these factors as a guide, no changes were made to the composition of the benchmarking peer group was reviewed and unchanged for 20152019 compensation decisions, except to be updated to reflect the merger of AMR Corporation and US Airways to create American Airlines Group.decisions. The competitive
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benchmarking analysis presented to the Committee in December 2014,2018, in advance of the February and March 20152019 compensation decisions, included the 2117 comparator companies noted below.
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CompensationExequity utilized two pay data was obtainedsources to determine the competitive position of United's pay relative to the peer group: (i) publicly disclosed pay information from the thenpeer companies' most recent proxy statements of our peer group companies (in most cases, the 20142018 proxy statement, reflecting 20132017 pay data). was used for pay comparisons involving the named executive officers and (ii) private survey compensation data was used for positions below the named executive officer level. In this proxy review, the 17 companies in the peer group had median annual revenue of approximately $37.3$31.0 billion and the Company's 2014 annual revenue at the time of the review was estimated at approximately $38.9 billion.$41.2 billion, which ranked at the 68th percentile relative to the peer group. The fact that United's revenue base was above the median was balanced by its position at the low-end of the group's market capitalization. The Committee considers the comparisons of the named executive officers' pay against publicly disclosed pay data from the peers on both a size-adjusted basis (derived by regressing peer group compensation against revenue size at United's estimated revenue) and without size adjustment. The private survey benchmarking review also considered information from Equilar'sExecutive Compensation Survey, which provides information for top executive roles at each of the participating peer companies. Within theUnited's peer group, 1311 of the 2117 peer companies participated in the Equilar survey, with median annual revenue of approximately $39$28.4 billion. As an additional point of reference for all executives, size-adjusted medians, as well as medians without size adjustment, for companies in general industry were also provided to the Committee based on survey data from Willis Towers Watson's2018 General Industry Executive Compensation Survey-U.S.
We compare total compensation opportunities for our executives to the market median (50th percentile) of our peer group. The Committee references both the size-adjusted median pay levels among the peers and the raw medians. The size-adjusted medians are derived by regressing peer group compensation based on revenue size relative to United's estimated revenue at the time of the December 2018 review to ensure that the peer pay levels are appropriately indexed to United in terms of relative revenue. Total target compensation for our benchmarking purposes means the sum of base salary, annual cash incentive target, and long-term incentive targets.targeted grant values. In addition, multi-year and special awards are annualized for the Company's executives and for executives of the peer companies. As is customary in these types of pay studies, retirement benefits were not included in the benchmark comparison. The Exequity benchmarking process compares the Company's executive pay by position in comparison to the most similarly situated executive roles among the peer organizations. Data availability is greater for the CEO and CFO positions, and pay comparisons for these roles were made solely against the CEO and CFO positions among the peer companies. For proxynamed executive officers without a direct benchmark role comparison, Exequity considered matching roles based on pay rank within the proxy and with reference to other officer positions to extrapolate pay trajectories across roles. The pay study review with the Committee includes specific discussion and consideration of the compensation packages provided at the airline peers, with primary focus on the size-relevant airlines (Delta and American).
The compensation information for our peer group is one factor utilized in setting total compensation for our executives.The Committee balances the benchmarking results with additional factors, such as each executive's experience, knowledge, skills, roles, and contributions to the Company, as well as consideration for internal pay parity of compensation among our executives. In selected cases in which relevant pay information for a specific role is available from our primary airline peers (Delta and American), we reference
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that data as a supplemental benchmarking input, in addition to the combined data from the full peer set. The Compensation Committee reviews all of these relevant factors but does not apply a specific weighting to the various factors. DevelopmentIn addition, in the case of the Company's current compensation program involved a convergence of the pay structures in place atexecutives who are recruited to join the Company, and Continental prior to the Merger. The current compensation structure was implemented post-Merger in 2011 and continued substantially the same through 2015. Based on the benchmarking results and with guidance from Exequity, the Committee made adjustments
in the 2015 pay allocation by shifting a portion of the total target opportunity from the annual incentive to the long-term incentive opportunity.top caliber executives.
Tally Sheets. Comprehensive tally sheets covering each of the Company's Section 16 reporting officers are provided to the Committee annually in advance of the meeting at which incentive compensation performance targets and award level opportunities are set and at which compensation levels and annual incentive awards are considered and decisions are made. The tally sheets provide a summary for each executive of total targeted and actual compensation levels over a multi-year period, an accumulated summary of outstanding awards, and estimated total payments under alternative separation scenarios. These tally sheets allow the Committee to make prospective pay decisions that are informed by compensation opportunities and earnings for past periods. The February 2015 tally sheet review included Messrs. B. Hart, Compton, G. Hart, Bonds, Smisek, and Rainey.
Our 2015 Executive Compensation Program
2019 Compensation Components |
The following discussion describes our 2015 compensation elementssection and decisions related to our "named executive officers" or "NEOs." Our 2015 named executive officers consist of:
The Company named Mr. Munoz as President and CEO effective September 8, 2015. On October 19, 2015, the Company announced that Mr. Munoz was taking a medical leave of absence. In connection with Mr. Munoz's leave of absence, on October 19, 2015, the Board appointed Brett Hart as Acting Chief Executive Officer. On March 14, 2016, Mr. Munoz returned to his role as President and CEO on a full-time basis and Mr. Hart resumed his position as Executive Vice President and General Counsel. Mr. Laderman was appointed Senior Vice President—Finance and Acting Chief Financial Officer effective August 3, 2015 in connection with the resignation on July 30, 2015 of Mr. Rainey, the Company's former Executive Vice President and Chief Financial Officer. Mr. Smisek stepped down from his roles as Chairman, President and CEO effective September 8, 2015.
2015 Key Compensation Components
The table below summarizessummarize the key components of our 20152019 executive compensation program,programs and detailedspecial arrangements related to the CEO transition announced in December 2019. Detailed descriptions of thesethe key compensation components appear below the table.table and a discussion of the transition arrangements follows the discussion of the 2019 key compensation components.
Key Annual Compensation Components
2019 NEO Compensation Levels. The 20152019 salary and incentive compensation award levels were considered and approved by the Compensation Committee through the compensation process described above and with reference to the benchmarking data prepared by and reviewed with Exequity. The salary, compensation opportunities, and employment terms and conditions for Mr. Munoz as reflectedExequity in his employment agreement were considered and approved through the compensation process described above andDecember 2018, with reference to peer compensation levels at American and Delta, and in consideration of internal pay parity. In February 2019, the benchmarking data described above, reflecting medianCommittee made changes to the annual total target compensation levels for each of the named executive officers as compared to their compensation levels in effect at year-end 2018. The 2019 changes were made through an increase in the target long-term incentive opportunity for each of the NEOs and, solely with respect to Mr. Laderman, an increase in base salary.
With respect to Messrs. Munoz and Kirby, compensation levels have been set to be competitive with the market and the adjustment in the long-term incentive opportunity was designed to follow year-over-year movement in competitive executive pay among the peer companies,reference group and to better align the overall mix of pay among our NEOs. Messrs. G. Hart and B. Hart were noted as wellconsistently strong performers with demonstrated proficiency and cross-functional capability while their pay levels were noted to have been persistently below the peers. With respect to Mr. Laderman, the Committee recognized that his compensation was set below market median upon his election to the role of executive vice president with the opportunity to align his compensation with the median over a period of demonstrated performance. The2019 target compensation opportunities for the NEOs are summarized in the table below.
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2019 Target Compensation Levels
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Name | | Salary($) | | Annual Incentive Program ($)(1) | | Time Vested RSUs ($)(2) | | Performance Based RSUs ($) | | Total Target Compensation ($) | ||||||
Oscar Munoz | 1,250,000 | 2,500,000 | 5,375,000 | 5,375,000 | 14,500,000 | |||||||||||
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J. Scott Kirby | 875,000 | 1,093,750 | 3,062,500 | 3,062,500 | 8,093,750 | (3) | ||||||||||
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Gregory L. Hart | 850,000 | 901,000 | 1,487,500 | 1,487,500 | 4,726,000 | |||||||||||
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Brett J. Hart | 775,000 | 821,500 | 1,356,250 | 1,356,250 | 4,309,000 | |||||||||||
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Gerald Laderman | 725,000 | (4) | 768,500 | 1,268,750 | 1,268,750 | 4,031,000 | ||||||||||
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The table below sets forth the key components of United's 2019 executive compensation programs as approved by the Committee in February 2019.
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employer. Exequity assisted in the preparation and review of the compensation analysis, and provided advice in connection with the negotiations pertaining to potential replacement value of outstanding incentives and alignment of the annual pay package with peer practices.
Mr. Munoz did not receive any incentive compensation awards in 2015, and the discussion below with respect to Mr. Munoz's 2015 compensation is limited to the compensation package as approved under his employment agreement. Prior to Mr. Laderman's assumption of the acting CFO role, his 2015 salary level was established and his 2015 incentive awards were granted by Mr. Smisek in his role as the CEO-administrator under the Company's compensation plans for persons who are not subject to Section 16 reporting.
There was no change in the 2015 salary or total target incentive award levels for any of the continuing named executive officers as compared to the 2014 salary and total target incentive award levels. However, for 2015, the Committee approved a re-allocation of a portion of the total target level compensation opportunity for the named executive officers, other than Mr. Smisek, from the annual incentive opportunity to the long-term incentive opportunity to align more closely with market practices within our peer group. This shift was made after considering the benchmarking analysis discussed above, which indicated that the Company's total targeted compensation levels for the named executive officers were generally slightly below the 50th percentile of the peer group but that a greater percentage of the named executive officers' total targeted incentives were being delivered in the form of targeted annual bonus opportunities and a lower percentage of the named executive officers' total targeted incentives were being delivered in the form of long-term incentives than was the case among the benchmarking peer companies. Mr. Smisek's 2015 compensation opportunity was evaluated with reference to the benchmarking review presented to the Committee in December 2014 in advance of the February and March 2015 compensation decisions. Mr. Smisek's compensation was set by reference to the median level of the peer group companies and the Committee determined that no changes were necessitated in his 2015 target compensation level or allocations in connection with such benchmarking review.
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Base Salary. The Compensation Committee sets baseBase salary levels are set in light of competitive practices among our peer companies of similar size and complexity,our primary airline peers, to reflect the responsibilities of each executive in the Company, in consideration of internal pay equity, and to balance fixed and variable compensation levels. The base salary level for Mr. Munoz was established with reference toAs discussed above, the foregoing and in consideration of his compensation and opportunities at his prior employer. Mr. Munoz's annual base
salary as set forth in his employment agreement is $1,250,000. The 20152019 base salary levels for Messrs. Munoz, Kirby, G. Hart, and B. Hart remain unchanged from the remaininglevels in effect at year-end 2017. Mr. Laderman's salary level was increased in 2019 by $25,000 (effective April 1, 2019), as compared to the level in effect at year-end 2018, to better position Mr. Laderman's salary versus the benchmark CFO median. The 2019 annual base salary levels for the named executive officers were as follows: Mr. B. Hart—Munoz—$715,000;1,250,000; Mr. Laderman—$500,000; Mr. Compton—Kirby—$875,000; Mr. G. Hart—$850,000; Mr. Bonds—B. Hart—$650,000,775,000; Mr. Smisek—Laderman—$975,000; and Mr. Rainey—$850,000. These salary levels are unchanged from the 2014 levels and remain currently in effect for the continuing named executive officers.
In connection with Mr. Hart's appointment to serve as acting CEO, the Compensation Committee approved an additional cash payment of $100,000 per month for the duration of his service as acting CEO. The additional cash payment for Mr. Hart was terminated on March 14, 2016 upon Mr. Munoz's return to his role as President and Chief Executive Officer on a full-time basis and Mr. Hart's resumption of his position as Executive Vice President and General Counsel. In connection with Mr. Laderman's appointment as acting CFO, the Compensation Committee approved an additional cash payment of $40,000 per month for the duration of his service as acting CFO. The Committee chose to provide a special monthly payment in light of the potentially limited duration of these assignments and to avoid impacting other compensation programs that are linked to base salary levels. The amounts of these payments were established in consultation with Exequity, and by reference to similar arrangements provided by companies in similar situations, and were deemed by the Compensation Committee to be commensurate with the additional duties and responsibilities assumed by each of Mr. Hart and Mr. Laderman in addition to their pre-existing roles with the Company.725,000.
2019 Annual Incentive Awards. The AIP award levels are set in light of competitive practices among our peer companies and our primary airline peers, to reflect the responsibilities of each executive in the Company, and in consideration of internal pay equity. The graphic below outlines the key elements of the 2019 annual incentive awards.
In 2015,2019, the named executive officers except Mr. Munoz, participated in the United Continental Holdings, Inc. Annual Incentive Program (the "AIP"),AIP, an annual cash incentive plan adopted pursuant to the Company's 2017 Incentive Plan 2010.Compensation Plan. In order for a payment to be made under the 20152019 AIP, awards, (i) the Company's 20152019 pre-tax income must meet or exceed the entry level pre-tax income established by the Compensation Committee and (ii) a payment must have been made (or will be made) under the Company's broad-based profit sharing plans for employees for such fiscal year. If either of these conditions is not satisfied, no payments are made under the AIP. As a risk mitigation factor, payment also requires that the Company must have an adequate level of unrestricted cash at the end of the performance period, as determined by the Committee. The 20152019 AIP awards permit the exercise of negative discretion by the Committee to reduce award payments (but not positivepayments. The 2019 AIP awards also include an individual performance modifier through which the Committee can adjust the AIP award payment based on individual performance considerations. The Committee can exercise discretion to reduce the payment by up to 100% or to increase award payments)the payment by up to 50%.
Under the AIP, "pre-tax income" means, with respect to a fiscal year, the aggregated consolidated net income adjusted to exclude reported income taxes of the Company as shown on the Company's consolidated financial statements for such year, but calculated excluding any special, unusual or non-recurring items as determined by the Compensation Committee in accordance with applicable accounting rules.(5)(4) For 2019, the AIP design included afuel price adjustment feature. Under this design, the Company's pre-tax income level
(4) See "Note 10—Special Charges and Unrealized (Gains) Losses on Investments" of the Combined Notes to Consolidated Financial Statements included in "Item 8. Financial Statements and Supplementary Data" in the 2019 Form 10-K for information on the special charges included in the 2019 calculations.
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achieved under the AIP awards would be adjusted if and solely to the extent that the Company's actual 2019 fuel prices varied by more than 5% as compared to the February 2019 fuel prices included in the financial model used to establish the pre-tax income goals. The 2015Company's actual full year 2019 fuel prices were approximately 5.4% lower than the forecast, resulting in a pre-tax income adjustment under the 2019 AIP. See Appendix A for a reconciliation of pre-tax income as measured for purposes of the AIP to GAAP pre-tax income.
2019 Goal Structure. The 2019 award opportunities under the AIP were based on an individual award opportunity granted to each participant, with thresholdan entry payout equal to 45%50% of the target opportunity, target payout equal to 100% of the target opportunity, and stretch payout equal to 200% of the target opportunity. The target award opportunity was allocated so that (1) 80%awards also included an individual performance modifier of 0-150%, with maximum payout capped at 200% of the target opportunity was based on level. As in prior years,pre-tax income performance goals and (2) 20% represented the largest percentage of the 2019 AIP opportunity (60% of the target opportunity wasopportunity). The 2019 AIP awards also utilized three other performance measures, each of which is directly or indirectly linked to the satisfaction of our customers throughout their travel experience with United: operational performance based on ourmonthly D:00 performance relative to industry peers (15% of the achievement of target opportunity), Unitedcustomer satisfaction performance goals.survey results (15% of the target opportunity), andNPS survey results (10% of the target opportunity).
NEO 2019 Target Opportunities. The 20152019 AIP individual target level opportunities for each of the named executive officers were expressed as a percentage of the executives' base salary earned during the year as follows: Mr. B. Hart—120%Munoz—200%; Mr. Laderman—110%; Mr. Compton—121%Kirby—125%; Mr. G. Hart—120%, Mr. Bonds—121%106%; Mr. Smisek—150%B. Hart—106%; and Mr. Rainey—120%Laderman—106%. As discussed above, in 2015, the Compensation Committee approved a reallocation of the incentive opportunity between AIP and long-term incentive compensation, resulting in a decline in the AIP opportunityThe 2019 target opportunities for each of the participating named executive officers, other than Messrs. LadermanNEOs remains unchanged from the levels at year-end 2018. See "Compensation Process and Smisek.Oversight" and "—Key Annual Compensation Components" above.
2019 Performance Goals.
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performance and involuntary denied boarding. J.D. Power rankings also measure airline performance.
2019 Performance Results. Thecombined 2019 performance relating to pre-tax income, D:00 operational goals, customer satisfaction, and NPS resulted in achievement at105% of the total target opportunity level under the AIP.
For 2015, the Companywe achieved pre-tax income excludingof $3.94 billion as measured under the AIP and adjusted for special items,charges and the fuel adjustment. This performance represents achievement between the target and stretch levels (
In reviewing the 2019 AIP results, including its ability to exercise negative discretion and to reduce the level of payments to the named executive officers by 15 percentage points, which resulted in payout at 171.67% of the target opportunity level. Although the Committee recognized that the Company's 2015 pre-tax income performance was one of the best results in the Company's history,apply an individual modifier, the Committee considered changes in fuel prices between the timemanagement's contributions toward the Company's 2015 budget was establishedoverall 2019 performance and responses to challenges throughout the time that AIP financial goals were set. Based on that analysis,year. Examples of 2019 performance factors considered by the Committee determined that itinclude appropriate progress toward the Company's growth plan, which was appropriateadversely impacted by the grounding of Boeing 737 MAX aircraft, the Company's earnings per share results during the year, successful implementation of a number of initiatives to reduceimprove the payment amountscustomer experience, progress related to the core4 and United's corporate culture, pre-tax margin results, operational performance results, and overall progress toward executing the Company's business objectives.
The Committee, with input and recommendations from Mr. Munoz, considered individual performance during 2019 and, based on its holistic assessment of individual performance, the Committee applied individual performance modifiers ranging from 100% to 120% for the named executive officers to reflect the impact of the 2015 fuel price changes. The Compensation Committee exercised negative discretion, as provided under the AIP, to reduce the amount of Mr. G. Hart's 2015 annual incentive compensation by $1,000,000. This reduction was made in connection with the Company's previously disclosed internal investigation related to the federal investigation associated with the Port Authority of New York and New Jersey, upon the recommendation (made on September 8, 2015) of the Special Committee formed in connection with such investigation. Mr. Smisek received pro-rated payment of his 2015 AIP award pursuant to the terms of his separation agreement. Mr. Rainey forfeited his AIP award in connection with his resignation.officers. Payments under the AIP are included in the 20152019 Summary Compensation Table under the column captioned "Non-Equity
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"Non-Equity Incentive Plan Compensation." The named executive officers are not eligible to receive payments under our profit sharing plans.
20152019 Long-Term Incentive Awards. In designingThe graphic below outlines the key elements of the 2019 long-term incentive awards.
All the long-term incentive award structure forincentives granted in 2019 are stock-settled and thus are directly linked to the Company, the Compensation Committee divided theCompany's stock price performance. The long-term incentive target opportunity into three separate awards, each of which has a three-year performance or vesting period. This design was put in place and has continued since our 2011 awards, withequally divided between the 2015 long-term incentives structured as follows:following two awards:
The totalIn order to better align our NEO pay mix with competitive norms among the peer companies, the target long-term incentive opportunities were established with reference to the benchmarking analysis conducted by Exequity and discussed with the Committee in December 2014, to reflect the responsibilitiesfor each of each executive in the Company, and in consideration of internal pay equity. As discussed above with respect to the AIP awards, for 2015, the Committee approved a re-allocation of a portion of the total target level compensation opportunity for the named executive officers, other than Mr. Smisek, from the annual incentive opportunity to the long-term incentive
opportunity to align more closely with market practices within our peer group. This shift was made after considering the benchmarking analysis discussed above, which indicated that the Company's total targeted compensation levels for the named executive officers were generally slightly belowincreased from the 50th percentilelevels in effect at year-end 2018 and were as follows: Mr. Munoz—$10,750,000; Mr. Kirby—$6,125,000; Mr. G. Hart—$2,975,000; Mr. B. Hart—$2,712,500; and Mr. Laderman—$2,537,500. Expressed as a percentage of the peer group but slightly higher thanexecutives' base salary, the group with respect to target levels of annual compensation as compared to long-term incentives. Mr. Smisek's 2015 compensation opportunity was evaluated with reference to the benchmarking review presented to the Committee in December 2014 in advance of the February and March 2015 compensation decisions. Mr. Smisek's compensation was set to correspond to the median level of the peer group companies and the Committee determined that no changes were necessitated in his 2015 target compensation level, including no re-allocation with respect to his AIP and long-term target opportunity levels.
For the named executive officers, the 2015 total long-term incentive target level opportunities were as follows: Mr. B. Hart—$1,537,250;Munoz—860%; Mr. Laderman—$1,000,000; Mr. Compton—$2,327,500;Kirby—700%; Mr. G. Hart—$1,827,500;350%; Mr. Bonds—$1,358,500; Mr. Smisek—$10,693,500;B. Hart—350%; and Mr. Rainey—$1,827,500. See "—Compensation Process and Oversight—Benchmarking" above. The 2015 total long-term target opportunities were divided equally among each of the three long-term incentive awards.Laderman—350%.
The 2015 Performance-Based RSU awards have a performance period of January 1, 2015 through December 31, 2017. We believe that the ROIC definition applicable to the 2015 awards is aligned with the parameters generally used by investors as well as our external reporting methodology, including capitalizing our aircraft operating lease expense at seven times and only including aircraft operating leases for which we are the lessor in our calculation of invested capital. For 2015, the entry level performance goal (10%) is aligned with our externally communicated long-term ROIC goal to drive performance in excess of the Company's approximate cost of capital, the target level (12%) is viewed by the Committee as a challenging goal that was established above the ROIC level that the Company has achieved in any prior three year period but below the Company's single-year achievement in 2014, and the maximum or "stretch" performance goal (14%) requires the Company to achieve ROIC performance at a level nearly 400 basis points higher than our achievement in any prior three-year period. Each 2015 award performance level was increased from the levels established with respect to the 2014 awards to reflect the Company's recent financial performance improvement. The goals are established with reference to the Company's operating plan, economic conditions at the time the goals were set, and a variety of scenarios for the Company's multi-year financial plan to address the challenges associated with forecasting results for a three-year measurement period.
The 2015 ROIC Performance-Based RSU awards have an entry opportunity equal to 50% of the target award value, a target opportunity of 100% of target value, and a maximum or "stretch" opportunity equal to 200% of the target award value. Payment opportunities under the ROIC
Performance-Based RSU awards are subject to linear interpolation between performance levels. As noted in the 2015 Summary Compensation Table below, the grant date fair value of the 2015 Performance-Based RSUs is the target level of the award based on the probable satisfaction of the required performance conditions as of the grant date.
The 2013 Performance-Based RSU awards, which had a performance period of January 1, 2013 through December 31, 2015, had the following performance goals: entry—8.1% ROIC; target—10% ROIC; and stretch—11% ROIC. In calculating the number of RSUs subject to the 2013 Performance-Based RSU awards, the Committee applied a discount factor to the closing price per share of Common Stock on the date of grant in recognition of the Company's history of ROIC not exceeding our cost of capital. As a risk mitigation factor, payment of the awards also required that the Company must have an adequate level of unrestricted cash at the end of the performance period, as determined by the Committee. The Committee also established a maximum payment amount with respect to the 2013 awards equal to two times the stock price on the date of grant (representing a $51.82 per unit maximum payment amount). For the 2013-2015 performance period, the Company's ROIC (14.7%) exceeded the required stretch level of performance (11% ROIC), and the 2013 Performance-Based RSUs were settled in cash in the first quarter of 2016 following review and certification by the Committee. The 20-day average closing price per share of Common Stock immediately preceding December 31, 2015 was $58.27 per share. However payments were capped at $51.82 per unit based on the maximum payment amount established for the awards. The payments to the named executive officers are included in the "Option Exercises and Stock Vested for 2015" table below.
In March 2015, following discussion and review, One-half of the Committee approved an amendment to2019 long-term incentives were based on a relative pre-tax margin performance measure. These incentives were granted in the RSU Program to permit grantingform ofstock-settled Performance-Based RSU awards with alternative performance metrics and granted RSU Program awards tothat measure and reward performance based on the Company's improvement in cumulative pre-tax margin over a three-year performance period as compared withto an industry peer group (American, Airlines Group, Inc., Delta, Air Lines Inc., Southwest, Airlines Co., JetBlue Airways Corporation, and Alaska Air Group, Inc.). The performance metric under these awards is similar to the metric used under the Long-term Relative Performance awards granted in prior years. However, the 2015 awards are in the form of cash-settled Performance-Based RSUs rather than a cash denominated award that is not linked to our stock price performance. As a result of this change in the relative performance award structure, all of the long-term incentives granted in 2015 are linked to the Company's stock price performance.
The goals established for the 2015 pre-tax margin Performance-Based RSU awards measure the Company's relative pre-tax margin improvement over the 2015-2017 performance period as compared to the industry peer group. Improvement over the performance periodPerformance by the Company and the industry group is measured with comparison to pre-tax margin performance achieved in 2014.2018. Performance is generally measured as (A) the Company's pre-tax income over the performance period divided by its revenue over such periodminus the Company's 20142018 pre-tax margin as compared to (B) the peer companies' aggregate pre-tax income over the performance period divided by the peer companies' aggregate revenue over such periodminus the peer companies' aggregate 20142018 pre-tax margin. The calculations are adjusted to exclude (i) write-offs of assets (including aircraft and associated parts), (ii) one-time gains or losses from the disposal of assets, and (iii) any other item of gain, income, loss, or expense determined to be special, itemsextraordinary or unusual in nature or infrequent in occurrence, in each case under clauses (i), (ii) and (iii) as determined by the Compensation Committee in accordance with applicable accounting rules. If the Company achieves at least the minimum threshold
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entry level of performance, the awards will be settled in cashstock following the end of the three-year performance period. As a risk mitigation factor, payment also requires that the Company must have an adequate level of unrestricted cash at the end of the performance period, as determined by the Committee. The Committee did not apply a maximum payment price per share with respect to the 2015 pre-tax margin Performance-Based RSU awards.
The 2015 pre-tax margin Performance-Based RSU awards have a performance period of January 1, 2015 through December 31, 2017. The target performance level established for the 20152019 relative pre-tax margin PBPerformance-Based RSUs was set by the Compensation Committee so that executives would earn market-competitive rewards ("target" level) for achieving pre-tax margin improvement substantially in excessdesigned to close a portion of the margin gap to the peer group (equal to peer group pre-tax margin change over the performance period plus 125(representing average annual relative improvement of 72 basis points). The entry performance level was designed to be achievable with solid relative performance (peer group change plus 200 basis points), whilewhich would represent maintaining the level of margin gap closure which has been achieved as of 2018 with recent strong performance. The stretch performance level (peer group change plus 300(representing average annual relative improvement of 144 basis points) was set at a high level requiring exceptional relative performance.performance to close the margin gap by the end of the three-year performance period. In determining the 2015-20172019-2021 performance goals, the Committee considered the historichistorical performance of the Company and the peer group, the Company's multi-year financial plan, and the economic and market conditions at the time the goals were established.
The 20152019 pre-tax margin Performance-Based RSUs compensation opportunities, subjectRSU awards have an entry opportunity equal to achievement of the specified performance levels, are expressed as a percentage50% of the target award value, as follows: entry—50%a target opportunity of target; target—100% of target;the target award value, and stretch—150%a maximum or "stretch" opportunity equal to 200% of target.the target award value. Payment opportunities under the relative pre-tax margin Performance-Based RSUs are subject to linear interpolation between performance levels. In accordance with ASC Topic 718, Compensation—Stock Compensation ("ASC Topic 718"), and as noted in the 20152019 Summary Compensation Table below, the grant date fair value of the relative pre-tax margin Performance-Based RSUs is zero becausereflected at the entry level based on the deemed probability of satisfaction of the required performance conditions was not considered probable as of the grant date.date (consistent with applicable accounting rules). As discussed above, the Committee believes that improvement in pre-tax margin continues to be an appropriate metric for motivating executive performance in line with stockholder interests. Although the performance conditions were not considered probable as
Settlement of Long-term Incentives for the Company2017-2019 Performance Period. The long-term incentive awards granted in 2017 divided the target opportunity equally between Performance-Based RSUs based on relative pre-tax margin performance and stockholders.
time-vested restricted stock units. The 20132017 relative pre-tax margin awards, which had a performance period of January 1, 20132017 through December 31, 2015,2019, were cash-basedcash-settled Performance-Based RSU awards and had the following performance goals using relative improvement in pre-tax margin as the metric: entry—peer group averagechange in pre-tax margin minus 60plus 74 basis points; target—peer group averagechange in pre-tax margin;margin plus 148 basis points; and stretch—peer group averagechange in pre-tax margin plus 80222 basis points. As a risk mitigation factor, the awards also required that the Company must have an adequate level of unrestricted cash at the end of the performance period, as determined by the Committee. The Company'sFor the 2017-2019 performance period, our relative pre-tax margin performance with respect(as compared to the 2013 relative performance awards did not meetbaseline year 2016) exceeded the entry levelindustry peer group by 154 basis points resulting in earned amounts between target and stretch (108.19% of performance,target).
Under the Performance-Based RSU program, pre-tax margin is calculated based on pre-tax income divided by revenue, and pre-tax income is adjusted to exclude (i) write-offs of assets (including aircraft and associated parts), (ii) one-time gains or losses from the disposal of assets, and (iii) any other item of gain, income, loss, or expense determined to be special, extraordinary or unusual in nature or infrequent in occurrence. The peer group calculations are based on publicly available financial statements for each industry
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peer company, as adjusted for such items as identified in such publicly available financial statements and no payments were madesubject to the named executive officers with respect to this 2013 long-term incentive award.
The 2017 relative pre-tax margin Performance-Based RSUs were settled in cash in the first quarter of 2020 following review and certification by the Committee of the level of performance achieved. The 20-day average closing price per share of Common Stock onimmediately preceding December 31, 2019 was $88.59 per share. Payment of these awards is included in the date of grant, rounded up to the nearest whole share.
CEO AgreementsTransition Arrangements
In December 2019, the Company announced that Mr. Munoz will transition from the role of CEO following the Annual Meeting and will assume the role of Executive Chairman and that Mr. Kirby, currently President of the Company, will assume the role of CEO at such time. In connection with the CEO transition and determining the compensation to be received by Mr. Munoz and Mr. Kirby, the Committee considered input from Exequity, the Committee's compensation consultant, and peer group market information, including consideration of the compensation levels at Delta and American. The premium-priced stock option award granted to Mr. Kirby with an extended vesting period was designed to motivate and reward long-term stockholder value creation while also providing retention value. See "—Benchmarking" above for a discussion of the Committee's compensation review process.
Transition Agreement with Mr. Munoz. TheOn December 4, 2019, the Company entered into an employment agreementa Transition Agreement with Mr. Munoz to memorialize(the "Transition Agreement") reflecting the terms of his employment as President and CEO of the Company. As described above, the compensation, benefits, terms and conditions of the transition and Mr. Munoz's employment. The Transition Agreement provides that Mr. Munoz will continue to serve as CEO and a director of the Company through the 2020 Annual Meeting and that, during this period, Mr. Munoz's employment agreement were approvedwill continue to be governed by the Compensation Committee after considerationterms and conditions of his existing Employment Agreement, dated December 31, 2015, with the Company and United (as amended, the "Employment Agreement"). The Transition Agreement contemplates that Mr. Munoz's compensation at his prior employer, including forfeited compensationMunoz will serve as Executive Chairman and prospective incentive opportunities; the benchmarking analysisremain a director of the peer group; general succession planning processes withinCompany until the Company;date of the Company's 2021 Annual Meeting of Stockholders (the "2021 Annual Meeting," and guidance and input from Exequity. In consideration of his commencement of employment, and in part to compensate him for incentive and equity compensation forfeitedsuch period, the "First Transition Period"). During the First Transition Period, Mr. Munoz will receive a base salary at his prior employer, the agreement provided him a sign-on cash payment of $5.2 million and an initial equity award (granted in 2016) with a grant date value of $6.8 million, vesting over a three year period. Mr. Munoz's sign-on cash payment is subject to repayment if he is terminated for cause or resigns without good reason within the first year of his employment. The agreement also provides an annual base salaryrate of $1,250,000$2,000,000 and beginning in 2016, Mr. Munoz iswill generally continue to be eligible to participate in senior executive-level employee benefit programs. Mr. Munoz's 2020 AIP award will be prorated for his service through the Company's annual cash bonus program, with a target annual bonus not less than 200% of his annual base salary. Also beginning in 2016, the Company will provide2020 Annual Meeting. Mr. Munoz anwill not be entitled to receive any annual incentive compensation with respect to any year after 2020 or any grants of long-term incentive award with a grantcompensation following the Annual Meeting. As of the date value of at least $10.5 million. However,the 2021 Annual Meeting, Mr. Munoz is not eligible to receivewill transition from his role as Executive Chairman and as a long-term incentive award for calendar year 2016 until he has been in continuous active service as President and Chief Executive Officer for a perioddirector of six months. See "Narrative to 2015 Summary Compensation Table and Grants of Plan-Based Awards for 2015 Table—Employment Agreement with Mr. Munoz" below for further discussion of the terms of the agreement and "Potential Payments upon Termination or Change in Control" below for a discussion and quantification of potential compensation and benefits to be provided under various separation scenarios. On April 19, 2016, Mr. Munoz, the Company, and United Airlines entered intowill continue as a non-officer employee until March 1, 2022 (such period, the "Second Transition Period"). During the Second Transition Period, Mr. Munoz will receive a base salary at an amendmentannual rate of $360,000 and will be eligible to participate in those employee benefit programs that are generally available to non-officer employees of the Company.
Under the Transition Agreement, if Mr. Munoz's employment agreement. The amendment, which was initiatedwith the Company is terminated by the Company without cause, by Mr. Munoz provides, among other things, that it isfor good reason or due to Mr. Munoz's death or disability, in each case during either the Company's expectation thatFirst Transition Period or Second Transition Period, then in lieu of any payments or benefits under the Employment Agreement, Mr. Munoz willwould be appointed Chairman ofentitled to receive the Board at the Company's 2018 annual meeting of stockholders, and the amendment modifies the definition of "Good Reason" such that the appointment of Robert A. Milton as Non-Executive Chairman of the Board would not constitute "Good Reason."
Mr. Smisek. Mr. Smisek and the Company entered into a separation and release agreement dated September 8, 2015, which was approved by the Special Committee. Mr. Munoz abstained from voting on the separation agreement with Mr. Smisek. The payments and benefits provided to Mr. Smisekthat he would have otherwise received under the separation agreement are substantially consistent with those provided under the terms ofTransition Agreement had his prior employment agreement and his outstanding incentive awards on the basis of a termination without cause when retirement eligible. However, Mr. Smiseknot terminated. The Transition Agreement also was permitted to retain the automobile that he was using at the time of his separation of which he had paid a portion of the purchase price. In addition, the agreement includes certain provisions related to future cooperationrestrictive covenants, including confidentiality, non-solicitation and repaymentnon-competition obligations from the Employment Agreement that are incorporated by reference. The Transition Agreement also contains mutual general releases of benefits and awards under certain circumstances. See "Potential Payments upon Termination or Change in Control" below for a discussion and estimate ofclaims among the potential compensation and benefits provided pursuant to the separation agreement.parties.
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Other Compensation ComponentsArrangement with Mr. Kirby. Mr. Kirby was recruited to United by Mr. Munoz in August 2016, after a three-decade career in the commercial airline business. His pending appointment to the role of CEO reflects a commitment from Mr. Munoz and the Board to preserve leadership continuity and implement the Company's succession plan. Mr. Kirby has played a pivotal role in enabling United's cultural transformation and developing and executing the Company's strategic plan, including the growth plan announced by the Company in January 2018. Most recently, Mr. Kirby has been instrumental in leading United's aggressive responses to the COVID-19 pandemic. To recognize Mr. Kirby's expanded responsibilities related to his transition to the role of CEO, the Committee approved an award of premium-priced stock options (with an exercise price of $110.21 per share, which is 25% higher than the closing stock price of our Common Stock on December 4, 2019, the date of grant) with a total Black-Scholes grant value of $9.7 million (the "Option Award"). The options have a ten-year term and vest in accordance with the following schedule: (i) 11% of the options will vest on May 20, 2023; (ii) 22% of the options will vest on May 20, 2024; (iii) 22% of the options will vest on May 20, 2025; (iv) 22% of the options will vest on May 20, 2026; (v) 11% of the options will vest on May 20, 2027; and (vi) 12% of the options will vest on May 20, 2028.
Other Compensation Components |
Severance Benefits. We have pre-established termsmaintain standardized severance benefits for our officers. These benefits are set forth in severance plans applicable to eachby officer level or, in the case of our named executive officers relatingCEO, through his employment agreement. Mr. Munoz's compensation and separation benefits in connection with his transition from CEO to severance and post-employment benefits provided upon certain termination events. In 2014,Executive Chairman are set forth in the Committee determined that individualTransition Agreement entered in December 2019, which is described above. We previously eliminated employment agreements for all officers other than agreements with our CEO, were no longer necessary.
CEO. The Company maintains the United Continental Holdings, Inc. Executive Severance Plan (the "Executive Severance Plan"), which provides severance benefits to executive officers, including Messrs. B. Hart, Compton, G. Hart, Bonds and Rainey, and the United Continental Holdings, Inc. Senior Officer Severance Plan, which provides severance benefits to senior officers, including Mr. Laderman.our EVPs in connection with termination events. The severance and post-employment benefits provided under the severance plansExecutive Severance Plan are consistent with the level of benefits that were provided to EVP-level officers of the Company under the named executive officers' priorterms of the employment agreements which expiredwere in September 2014, and these plans were approved and adopted by the Compensation Committee ineffect prior to October 2014. The terms of Mr. Rainey's departure were governed by the Executive Severance Plan.
Based on the advice of Exequity, we believe that the describedour severance compensation and benefits are competitive with typical practices and that they provide appropriate levels of compensation and terms and conditions related to executive separations. Further, we believe that these arrangements are an important component of our compensation packages in terms of attracting and retaining top caliber talent in senior leadership roles and in defining terms and conditions of executive separation events. See "Potential Payments Uponupon Termination or Change in Control" below for a discussion and estimate of the potential compensation and benefits provided pursuant to these arrangements.
Retirement Benefits.
Frozen SERP. Prior to the Merger, Continental maintained supplemental executive retirement plan ("SERP") benefits for Messrs. Laderman, Compton, Bonds and Smisek that provide an annual retirement benefit expressed as a percentage of the executives' final average compensation. The SERP is not a current element of the Company's compensation program. The SERP benefit for Messrs. Compton, Bonds, and Smisek was frozen as of December 31, 2010, while the SERP benefit for Mr. Laderman was partially frozen as of December 31, 2010 and fully frozen as of December 31, 2013. The benefit formulas and the compensation limitations applicable to the SERP are described below under "Narrative to Pension Benefits Table."
Frozen Pension Benefits. Management and administrative employees from Continental, including Messrs. Laderman, Compton, G. Hart, Bonds, Smisek and Rainey, participate in the Continental Retirement Plan ("CARP"), a non-contributory, defined benefit pension plan in which substantially all of Continental's non-pilot domestic employees participated. The CARP benefits for management and administrative employees were frozen as of December 31, 2013. The CARP benefit is based on a formula that utilizes final average compensation and service while one is an eligible employee. The benefit formulas and the compensation limitations applicable to the CARP are described below under "Narrative to Pension Benefits Table."
Defined Contribution Retirement Benefits. We provide retirement benefits including a tax qualified 401(k) plan to all of our non-union employees. The Company maintains a tax qualified 401(k) benefitplan and an excess 401(k) cash direct and cash match program for management and administrative employees, including the named executive officers. We believe these benefits encourage retention and are part of delivering an overall competitive pay package necessary to recruit and retain talented executives.
Perquisites. We offer our named executive officers certain perquisites that we believe are generally consistent with those provided to executives at similar levels at companies within the airline industry
and general industry groups. We believe that providing certain benefits to our executives, rather than cash, enhances retention, results in a cost savings to the Company, and strengthens our relationships with our executives. For example, travel privileges on United flights provide our executives and non-management directors the opportunity to become familiar with our network, product and locations and to interact with customers and employees. The incremental cost to the Company of providing such flight benefits is minimal, while we believe the value of these benefits to the named executive officers is perceived by them to be high. Other benefits are primarily linked to maintaining the health of our executives and to financial and tax planning and assistance, or to benefits that were provided prior to the Merger with Continental and were retained in individual post-Merger benefit packages. Please refer to "2015 Summary Compensation Table" and the footnotes thereto for additional information regarding perquisites.
Other Executive Compensation Matters
Recoupment of Earned Awards/"Claw-back" Provisions. All of our incentive award programs include claw-back provisions requiring the return of incentive payments in financial restatement situations to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any SEC rule.
Stock Ownership Guidelines. The Compensation Committee has approved stock ownership guidelines that apply to our executive officers. The guidelines encourage our executives, including each of the named executive officers, to hold shares of Common Stock or equity-based awards with a fair market value that equals or exceeds a multiple of the executive's base salary. The CEO level stock ownership target is five times base salary, the stock ownership target for Messrs. B. Hart, Compton, G. Hart, and Bonds is two times base salary, and the stock ownership target for Mr. Laderman is one times base salary. For purposes of determining whether an executive satisfies the stock ownership guidelines, restricted shares and restricted stock units are included in total stock holdings. The Committee reviews equity ownership at least annually. Once an executive is determined to be in compliance with the stock ownership guidelines, the executive will be considered to be in compliance until such time as he or she sells or otherwise disposes of any his or her shares of Common Stock, restricted shares or restricted stock units. Following any such sale or disposition, the Committee will reevaluate the executive's compliance with the stock ownership guidelines at the next annual evaluation date. As of March 1, 2016, all of our continuing named executives officers are currently in compliance with the guidelines. We also maintain stock ownership guidelines that apply to our non-employee directors, which are described below in "2015 Director Compensation."
Securities Trading Policy. Our securities trading policy prohibits speculative and derivative trading and short selling with respect to our securities by all officers and directors. Our securities trading policy prohibits pledging and hedging Company securities by our officers and directors.
Tax Matters. In designing and implementing the programs applicable to executives, we consider the effects of applicable sections of the Internal Revenue Code of 1986, as amended (the "Code"), including section 162(m). Section 162(m) of the Code limits the tax deductibility by a company of compensation in excess of $1 million paid to the company's chief executive officer and its three other most highly compensated executive officers (other than the chief financial officer). However, performance-based compensation that has been approved by stockholders is excluded from the $1 million limit if, among other requirements, the compensation is payable only upon attainment of pre-established, objective performance goals. While the tax impact of any compensation arrangement is one factor that the Committee may consider in its deliberations, this impact would be evaluated in light of the Company's overall compensation philosophy and objectives. Under certain circumstances, the Committee believes that the Company's and stockholders' interests would be best served by providing
compensation that is not fully deductible and that its ability to exercise discretion outweighs the advantages of requiring that all compensation be qualified under section 162(m).
Consistent with historic practice and the travel policies at other airlines, the Company provides tax indemnification on the travel benefits provided to active and certain former officers. The Company has eliminated tax indemnification for post-separation perquisites provided to officers who were not officers as of the date the policy was adopted. The tax indemnification provided to each of the named executive officers with respect to active and former (grandfathered) officer travel is subject to an annual limit. Other benefits are primarily linked to maintaining the health of our executives and to financial and tax planning and
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assistance. Please refer to the "All Other Compensation" column of the "2019 Summary Compensation Table" and the footnotes thereto for additional information regarding perquisites.
Other Executive Compensation Matters |
Compensation Recoupment of Earned Awards/"Claw-back" Policy. In 2018, the Committee Report
adopted an enhanced claw-back policy applicable to annual and long-term incentive compensation of covered executives upon specified triggering events. The revised claw-back policy provides the Committee with discretion to require the return, repayment or forfeiture of any annual or long-term incentive compensation payment or award to a covered executive if the Committee determines that a covered executive engaged in misconduct that resulted in a material violation of (i) federal or state law that caused a material adverse impact to the Company's financial statements or reputation or (ii) the Company's Code of Ethics and Business Conduct that caused a material adverse impact to the Company's financial statements or reputation. All our NEOs, as well as any other "executive officer" as defined under Rule 3b-7 under the Exchange Act are covered by the enhanced claw-back policy. The policy includes a three-year look back period from the time of a triggering event. In addition, all our annual and long-term incentive award programs include claw-back provisions requiring the return of incentive payments in financial restatement situations to the extent necessary to comply with applicable law including, without limitation, the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act or any SEC rule.
Stock Ownership Guidelines. The Committee has approved stock ownership guidelines for our officers. The guidelines encourage our officers, including each of the named executive officers, to hold shares of Common Stock or equity-based awards with a fair market value that equals or exceeds a multiple of the executive's base salary. Currently, the CEO level stock ownership target is six times base salary, the President level stock ownership guideline is four times base salary, the EVP level stock ownership target is three times base salary, the SVP stock ownership target is two times base salary, and the VP stock ownership target is one times base salary. For purposes of determining whether an officer satisfies the stock ownership guidelines, restricted shares and stock-settled and time-vested RSUs are included in total stock holdings, while cash-settled RSUs do not count toward the total stock holdings. A newly hired or promoted officer has five years to achieve the stock ownership targets set forth in the guidelines. The Committee reviews equity ownership at least annually. Once an officer is determined to be in compliance with the stock ownership guidelines, he or she will be considered in compliance until such time as he or she sells or otherwise disposes of any of his or her shares of Common Stock. Following any such sale or disposition, the Committee will reevaluate the officer's compliance with the stock ownership guidelines at the next annual evaluation date. If an officer has not achieved the target ownership level, then the officer is required to hold 50% of the net shares issued upon vesting of restricted stock or RSUs until the officer achieves the target ownership level. All our named executive officers were in compliance with the guidelines as of the last measurement date. We also maintain stock ownership guidelines that apply to our non-employee directors, which are described in "2019 Director Compensation."
Securities Trading Policy; Prohibition on Pledging and Hedging. Our securities trading policy prohibits speculative and derivative trading and short selling with respect to our securities by all officers and directors. Our securities trading policy also prohibits pledging and hedging Company securities by our officers and directors. See also "Corporate Governance—Prohibition on Pledging and Hedging" above.
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Compensation Committee Report |
We have reviewed and discussed the CD&A with management. Based on such review and discussions, we recommended to the Board that the CD&A be included in the Company's Proxy Statement on Schedule 14Athis proxy statement and the Company's Annual Report on2019 Form 10-K for the year ended December 31, 2015.(6)10-K.
Respectfully submitted, |
2019 Summary Compensation Table |
The following table provides information regarding (i) each person who served as the Company's principal executive officer during 2015 (Oscar Munoz, Brett Hart, and Jeffery Smisek)(Mr. Munoz), (ii) each person who served as the Company's principal financial officer during 2015 (Gerald Laderman and John Rainey)(Mr. Laderman), and (iii) the three other most highly compensated executive officers in 2015 who were serving at year-end (James Compton, Gregory2019 (Messrs. Kirby, G. Hart and Michael Bonds)B. Hart), determined in accordance with applicable SEC disclosure rules. The table provides information for 2015, 20142019 and, 2013 ifto the executive officer was included in the Company's Summary Compensation Table for those years.
Name and Principal Position | Year | Salary ($) | Bonus ($)(4) | Stock Awards ($)(5) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($)(6) | Change in Pension Value ($)(7) | All Other Compensation ($)(8) | Total ($) | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oscar Munoz(1) | 2015 | 261,218 | 5,200,000 | 124,493 | 0 | 0 | 0 | 209,748 | 5,795,459 | |||||||||||||||||||
President & Chief | ||||||||||||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||
Brett Hart(2) | 2015 | 715,000 | 246,154 | 1,044,692 | 0 | 1,472,900 | 0 | 182,387 | 3,661,133 | |||||||||||||||||||
Acting Chief Executive | ||||||||||||||||||||||||||||
Officer | ||||||||||||||||||||||||||||
Executive Vice President | ||||||||||||||||||||||||||||
and General Counsel | ||||||||||||||||||||||||||||
Gerald Laderman(3) | 2015 | 500,000 | 200,000 | 679,642 | 0 | 944,167 | 0 | 155,349 | 2,479,158 | |||||||||||||||||||
Senior Vice President & | ||||||||||||||||||||||||||||
Acting Chief Financial | ||||||||||||||||||||||||||||
Officer | ||||||||||||||||||||||||||||
James Compton | 2015 | 875,000 | 0 | 1,581,660 | 0 | 1,817,521 | 0 | 285,316 | 4,559,497 | |||||||||||||||||||
Vice Chairman & Chief | 2014 | 875,000 | 0 | 1,593,088 | 0 | 1,890,000 | 684,716 | 204,951 | 5,247,755 | |||||||||||||||||||
Revenue Officer | 2013 | 875,000 | 0 | 1,183,888 | 0 | 1,012,331 | 0 | 90,424 | 3,161,643 | |||||||||||||||||||
Gregory Hart | 2015 | 850,000 | 0 | 1,241,907 | 0 | 751,000 | 0 | 225,659 | 3,068,566 | |||||||||||||||||||
Executive Vice | 2014 | 766,859 | 0 | 1,083,712 | 0 | 1,656,415 | 58,375 | 131,597 | 3,696,958 | |||||||||||||||||||
President & Chief | ||||||||||||||||||||||||||||
Operations Officer | ||||||||||||||||||||||||||||
Michael Bonds | 2015 | 650,000 | 0 | 923,236 | 0 | 1,350,158 | 0 | 213,139 | 3,136,533 | |||||||||||||||||||
Executive Vice President, | ||||||||||||||||||||||||||||
Human Resources & | ||||||||||||||||||||||||||||
Labor Relations | ||||||||||||||||||||||||||||
Former Officers: | ||||||||||||||||||||||||||||
Jeffery Smisek(3) | 2015 | 672,159 | 0 | 7,266,334 | 0 | 1,726,485 | 0 | 5,301,065 | 14,966,043 | |||||||||||||||||||
Former Chairman, | 2014 | 975,000 | 0 | 7,725,728 | 0 | 2,340,000 | 1,419,221 | 302,277 | 12,762,226 | |||||||||||||||||||
President & Chief | 2013 | 975,000 | 0 | 5,741,403 | 0 | 1,253,362 | 0 | 168,540 | 8,138,305 | |||||||||||||||||||
Executive Officer | ||||||||||||||||||||||||||||
John Rainey(3) | 2015 | 512,179 | 0 | 1,241,907 | 0 | 0 | 0 | 248,030 | 2,002,116 | |||||||||||||||||||
Former Executive Vice | 2014 | 850,000 | 0 | 1,228,251 | 0 | 1,836,000 | 56,886 | 177,340 | 4,148,477 | |||||||||||||||||||
President & Chief | 2013 | 823,750 | 0 | 912,752 | 0 | 953,037 | 0 | 134,634 | 2,824,173 | |||||||||||||||||||
Financial Officer |
In December 2019, the Company announced that Mr. Munoz was taking a medical leavewill transition from the role of absence. On March 14, 2016,CEO following the Annual Meeting and will assume the role of Executive Chairman and that Mr. Munoz returned to hisKirby, currently the President of the Company, will assume the role as President and Chief Executive Officer on a full-time basis. of CEO of the Company at such time.
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Name and Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($)(1) | Option Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | | Change in Pension Value ($)(4) | All Other Compensation ($)(5) | Total ($) | |||||||||
Oscar Munoz | 2019 | 1,250,000 | — | 8,062,572 | — | 2,887,500 | — | 442,933 | 12,643,005 | ||||||||||
Chief Executive | 2018 | 1,250,000 | — | 5,250,024 | — | 3,804,775 | — | 189,033 | 10,493,832 | ||||||||||
Officer | 2017 | 1,250,000 | — | 7,838,135 | — | — | — | 472,999 | 9,561,134 | ||||||||||
| | | | | | | | | | | | | | | | | | | |
J. Scott Kirby | 2019 | 875,000 | — | 4,593,876 | 9,700,000 | 1,378,125 | — | 232,484 | 16,779,485 | ||||||||||
President | 2018 | 875,000 | — | 2,734,433 | — | 1,664,589 | — | 185,392 | 5,459,414 | ||||||||||
2017 | 875,000 | — | 4,082,366 | — | 928,069 | — | 222,183 | 6,107,618 | |||||||||||
| | | | | | | | | | | | | | | | | | | |
Gregory L. Hart | 2019 | 850,000 | — | 2,231,304 | — | 946,050 | 56,840 | 251,132 | 4,335,326 | ||||||||||
Executive Vice | 2018 | 850,000 | — | 1,275,037 | — | 1,371,241 | — | 224,539 | 3,720,817 | ||||||||||
President and Chief | |||||||||||||||||||
Operations Officer | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |
Brett J. Hart | 2019 | 775,000 | — | 2,034,466 | — | 1,035,090 | — | 177,934 | 4,022,490 | ||||||||||
Executive Vice | 2018 | 775,000 | — | 1,162,514 | — | 1,304,608 | — | 157,457 | 3,399,579 | ||||||||||
President and | 2017 | 747,500 | — | 2,487,539 | 750,007 | 1,064,817 | — | 160,009 | 5,209,872 | ||||||||||
Chief Administrative | |||||||||||||||||||
Officer | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |
Gerald Laderman | 2019 | 718,750 | — | 1,903,197 | — | 800,064 | — | 199,318 | 3,621,329 | ||||||||||
Executive Vice | 2018 | 579,271 | 156,250 | 706,902 | — | 954,167 | — | 160,946 | 2,557,536 | ||||||||||
President and | 2017 | 507,500 | — | 761,543 | — | 631,624 | 196,018 | 146,517 | 2,243,202 | ||||||||||
Chief Financial | |||||||||||||||||||
Officer | |||||||||||||||||||
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Restricted Share2019 long-term incentives value was structured one-half in time-vested RSUs and Restricted Share Unit Awards. For the restricted share awards, the amount was calculated by multiplying the number of restricted shares awarded by the closing price per share of Common Stock on the date of grant ($66.72 per share on February 18, 2015). See "2015 Director Compensation" below for a discussion of the calculation of the grant date fair value of the non-employee director restricted share unit awards.
Performance-Based RSUs. In 2015, the Company granted two separate awards of Performance-Based RSUs. On February 18, 2015 the Company granted Performance-Based RSUs with performance based on ROIC achievement. On March 19, 2015, the Company grantedone-half in Performance-Based RSUs with performance based on the Company's pre-tax margin improvement as compared with an industry peer group.
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58 | | | | 2020 Proxy Statement | | |
Time-vested RSUs. For the time-vested RSU awards, the grant date fair value was calculated by multiplying the number of RSUs awarded by the closing price per share of Common Stock on the date of grant. See the footnotes to the Grants of Plan-Based Awards for 2019 table below for the share price on the date of grant.
Performance-Based RSUs. In accordance with the SEC disclosure rules, the aggregate grant date fair value of the Performance-Based RSUs has been determined based on the probable satisfaction of the performance condition for those awards atand the closing price per share of Common Stock on the date of grant. In accordance with ASC Topic 718, the grant date fair value of the ROIC2019 relative pre-tax margin Performance-Based RSUs representsis calculated based on the entry level (50% of the target valuelevel) of the awardsperformance based on the probable satisfaction of the required performance condition as of the grant date and calculated based on the average closing price per share of Common Stock for the 20 trading days immediately preceding the date of grant ($69.29 per share as of February 18, 2015). In accordance with ASC Topic 718, the grant date fair value of the relative pre-tax margin Performance-Based RSUs is zero because the satisfaction of the required performance conditions was not considered probable as of the grant date.
| ROIC Performance-Based RSUs Maximum Value ($) | Pre-tax Margin Performance-Based RSUs Maximum Value ($) | |||||
---|---|---|---|---|---|---|---|
Oscar Munoz | — | — | |||||
Brett Hart | 1,064,433 | 741,040 | |||||
Gerald Laderman | 692,484 | 482,044 | |||||
James Compton | 1,611,547 | 1,122,000 | |||||
Gregory Hart | 1,265,374 | 880,978 | |||||
Michael Bonds | 940,681 | 654,888 | |||||
Jeffery Smisek | 7,403,637 | 5,154,645 | |||||
John Rainey | 1,265,374 | 880,978 |
| | | | | | | | | | ||||||||||||
| | | | Pre-tax Margin Performance- Based RSUs | | ||||||||||||||||
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| Grant Date | Closing Share Price on the Grant Date ($/Sh) | Target Value ($) | Maximum Value ($) | | ||||||||||||||||
Oscar Munoz | | | 2/27/19 | | | | 87.60 | | | | 5,375,048 | | | | 10,750,097 | | | ||||
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J. Scott Kirby | | | 2/27/19 | | | | 87.60 | | | | 3,062,584 | | | | 6,125,167 | | | ||||
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Gregory L. Hart | | | 2/27/19 | | | | 87.60 | | | | 1,487,536 | | | | 2,975,071 | | | ||||
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Brett J. Hart | | | 2/27/19 | | | | 87.60 | | | | 1,356,311 | | | | 2,712,622 | | | ||||
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Gerald Laderman | | | 2/27/19 | | | | 87.60 | | | | 1,268,798 | | | | 2,537,597 | | | ||||
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The unvestedtarget value of the long-term incentive awards held byon the date of grant is calculated based on the closing stock price on the date of grant and fractional amounts are rounded up. Therefore, the target value of the actual awards on the date of grant is not identical to the target value set forth in the CD&A above.
achieve the entry level of performance under the Long-term Relative Performance Program awards granted in 2013 for the 2013-2015 performance period and therefore no payments were earned under those awards.
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Table of December 31, 2013. For the period from December 31, 2014 to December 31, 2015,Contents
rate had offsetting effects on the present value of accumulated benefits increased due to the passage of time and the change in the lump sum mortality table. However, these increases were offset due to an increase in the discount rate and lump sum interest rate, resulting in a net decrease in value as follows:of $7,461 for Mr. Laderman—($44,662); Mr. Compton—($54,267); Mr. G. Hart—($10,399); Mr. Bonds—($29,658); Mr. Smisek—($262,773); and Mr. Rainey—($12,734).Laderman. See "Narrative to Pension Benefits Table" below for a discussion of the assumptions used to calculate the present values of these pension benefits and further information on the provisions of the plans.
Name | Insurance Premiums Paid by Company ($)(a) | 401(k) Company Contributions ($)(b) | 401(k) Cash Direct and Cash Match Program ($)(b) | Perquisites and Other Benefits ($)(c) | Tax Indemnification ($)(d) | Non-employee Director Compensation ($)(e) | Separation Benefits ($)(f) | Total ($) | |||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Oscar Munoz | — | — | — | 69,882 | 18,245 | 121,621 | 0 | 209,748 | |||||||||||||||||
Brett Hart | 3,148 | 16,563 | 124,102 | 26,508 | 12,066 | 0 | 182,387 | ||||||||||||||||||
Gerald Laderman | 6,946 | 21,200 | 89,200 | 19,410 | 18,593 | 0 | 155,349 | ||||||||||||||||||
James Compton | 15,241 | 19,875 | 187,500 | 37,391 | 25,309 | 0 | 285,316 | ||||||||||||||||||
Gregory Hart | 5,753 | 18,550 | 156,899 | 22,334 | 22,123 | 0 | 225,659 | ||||||||||||||||||
Michael Bonds | 5,688 | 19,875 | 134,175 | 25,370 | 28,031 | 0 | 213,139 | ||||||||||||||||||
Jeffery Smisek | 13,915 | 19,875 | 131,047 | 130,639 | 36,018 | 4,969,571 | 5,301,065 | ||||||||||||||||||
John Rainey | 2,289 | 18,550 | 91,807 | 15,578 | 21,732 | 98,074 | 248,030 |
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Name | Insurance Premiums Paid by Company ($)(a) | 401(k) Company Contributions ($)(b) | 401(k) Cash Direct and Cash Match Program ($)(b) | Perquisites and Other Benefits ($)(c) | Tax Indemnification ($)(d) | Total ($) | ||||||
Oscar Munoz | | 17,412 | | 19,600 | | 334,234 | | 41,972 | | 29,715 | | 442,933 |
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J. Scott Kirby | | 6,960 | | 18,200 | | 146,873 | | 29,180 | | 31,271 | | 232,484 |
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Gregory L. Hart | | 8,088 | | 21,000 | | 145,593 | | 48,534 | | 27,917 | | 251,132 |
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Brett J. Hart | | 5,249 | | 18,200 | | 116,975 | | 22,105 | | 15,405 | | 177,934 |
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Gerald Laderman | | 15,062 | | 22,400 | | 111,433 | | 29,802 | | 20,621 | | 199,318 |
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The amount shown for Mr. Munoz includes relocation benefits ($27,680) and third party jet travel between Chicago and his residence in Florida necessitated by his medical condition ($33,999). The amounts shown for Messrs. B. Hart, G. Hart, and Bonds include a health club membership, financial planning and tax services, and an executive physical. The amount shown for Mr. Laderman includes financial planning and tax services and an executive physical. The amount shown for Mr. Compton includes a health club membership and an automobile benefit. The amount shown for Mr. Smisek includes financial planning and tax services ($51,875), an automobile benefit related to the vehicle transferred to him in connection with his separation from service ($59,230), an executive physical, and an enhanced airport parking benefit. The amount shown for Mr. Rainey includes a health club membership and financial planning and tax services. The cost of the financial planning and tax services, relocation benefits, and jet services is the amount paid by the Company to the service
provider or through reimbursement to the officer. The incremental cost of the automobile benefit of Mr. Compton is the depreciation cost incurred for the year and for Mr. Smisek is the Company's depreciated book value of the vehicle at the time of transfer. The automobile benefit amounts also include actual expenses paid directly or reimbursed by the Company with respect to fuel and maintenance costs incurred during employment.
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60 | | | | 2020 Proxy Statement | | |
Grants of Plan-Based Awards for 2015
Grants of Plan-Based Awards for 2019 |
The following table sets forth information regarding awards granted during 20152019 to our named executive officers. The 2019 annual incentive awards were granted pursuant to our Annual Incentive ProgramAIP which iswas implemented under our 2017 Incentive Plan 2010.Compensation Plan. The ROIC Performance-Based RSUs and relative pre-tax margin Performance-Based RSUs were granted pursuant to our Performance-Based RSU Program which iswas implemented under our 20082017 Incentive Compensation Plan. The restricted sharetime-vested RSU awards and, with respect to Mr. Kirby only, the stock options, also were granted pursuant to our 20082017 Incentive Compensation Plan. The restricted share unit awards were granted to Mr. Munoz pursuant to our Director Equity Incentive Plan under our compensation program for non-employee directors.
| | | | | | | | All Other Stock Awards: Number of Shares of Stock or Units (#) | All Other Option Awards: Number of Securities Underlying Options (#) | | | |||||||||||||||||||||||
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| | Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | Exercise or Base Price of Option Awards ($/Sh) | Grant Date Fair Value of Stock and Option Awards ($)(6) | |||||||||||||||||||||||||||||
Name | Grant Date | Threshold ($) | Target ($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) | |||||||||||||||||||||||||||
Oscar Munoz | 6/10/15 | (1) | — | — | — | — | — | — | 2,361.61 | — | — | 124,493 | ||||||||||||||||||||||
Brett Hart | 2/18/15 | (2) | 386,100 | 858,000 | 1,716,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 3,841 | 7,681 | 15,362 | — | — | — | 532,216 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 3,656 | 7,311 | 10,967 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 7,681 | — | — | 512,476 | |||||||||||||||||||||||
Gerald Laderman | 2/18/15 | (2) | 247,500 | 550,000 | 1,100,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 2,499 | 4,997 | 9,994 | — | — | — | 346,242 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 2,378 | 4,756 | 7,134 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 4,997 | — | — | 333,400 | |||||||||||||||||||||||
James Compton | 2/18/15 | (2) | 476,438 | 1,058,750 | 2,117,500 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 5,815 | 11,629 | 23,258 | — | — | — | 805,773 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 5,535 | 11,070 | 16,605 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 11,629 | — | — | 775,887 | |||||||||||||||||||||||
Gregory Hart | 2/18/15 | (2) | 459,000 | 1,020,000 | 2,040,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 4,566 | 9,131 | 18,262 | — | — | — | 632,687 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 4,346 | 8,692 | 13,038 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 9,131 | — | — | 609,220 | |||||||||||||||||||||||
Michael Bonds | 2/18/15 | (2) | 353,925 | 786,500 | 1,573,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 3,394 | 6,788 | 13,576 | — | — | — | 470,341 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 3,231 | 6,461 | 9,692 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 6,788 | — | — | 452,895 | |||||||||||||||||||||||
Jeffery Smisek | 2/18/15 | (2) | 658,125 | 1,462,500 | 2,925,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 26,713 | 53,425 | 106,850 | — | — | — | 3,701,818 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 25,429 | 50,857 | 76,286 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 53,425 | — | — | 3,564,516 | |||||||||||||||||||||||
John Rainey(7) | 2/18/15 | (2) | 459,000 | 1,020,000 | 2,040,000 | — | — | — | — | — | — | — | ||||||||||||||||||||||
2/18/15 | (3) | — | — | — | 4,566 | 9,131 | 18,262 | — | — | — | 632,687 | |||||||||||||||||||||||
3/19/15 | (4) | — | — | — | 4,346 | 8,692 | 13,038 | — | — | — | 0 | |||||||||||||||||||||||
2/18/15 | (5) | — | — | — | — | — | — | 9,131 | — | — | 609,220 |
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Estimated Future Payouts Under Non-Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards | All Other Stock Awards: Number of Shares of Stock or | All Other Option Awards: Number of Securities Underlying | Exercise or Base Price of Option | Grant Date Fair Value of Stock and Option | |||||||||||||||||||
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Name | Grant Date | Approval Date | Threshold ($) | Target ($) | Maximum ($)(1) | Threshold (#) | Target (#) | Maximum (#) | Units (#) | Options (#) | Awards ($/Sh) | Awards ($)(5) | ||||||||||||
Oscar Munoz | 2/27/19(1) | 2/27/19 | 1,250,000 | 2,500,000 | 5,000,000 | — | — | — | — | — | — | — | ||||||||||||
2/27/19(2) | 2/27/19 | — | — | — | 30,680 | 61,359 | 122,718 | — | — | — | 2,687,524 | |||||||||||||
2/27/19(3) | 2/27/19 | — | — | — | — | — | — | 61,359 | — | — | 5,375,048 | |||||||||||||
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J. Scott Kirby | 2/27/19(1) | 2/27/19 | 546,875 | 1,093,750 | 2,187,500 | — | — | — | — | — | — | — | ||||||||||||
2/27/19(2) | 2/27/19 | — | — | — | 17,481 | 34,961 | 69,922 | — | — | — | 1,531,292 | |||||||||||||
2/27/19(3) | 2/27/19 | — | — | — | — | — | — | 34,961 | — | — | 3,062,584 | |||||||||||||
12/4/19(4) | 12/4/19 | — | — | — | — | — | — | — | 306,865 | 110.21 | 9,700,000 | |||||||||||||
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Gregory L. Hart | 2/27/19(1) | 2/27/19 | 450,500 | 901,000 | 1,802,000 | — | — | — | — | — | — | — | ||||||||||||
2/27/19(2) | 2/27/19 | — | — | — | 8,491 | 16,981 | 33,962 | — | — | — | 743,768 | |||||||||||||
2/27/19(3) | 2/27/19 | — | — | — | — | — | — | 16,981 | — | — | 1,487,536 | |||||||||||||
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Brett J. Hart | 2/27/19(1) | 2/27/19 | 410,750 | 821,500 | 1,643,000 | — | — | — | — | — | — | — | ||||||||||||
2/27/19(2) | 2/27/19 | — | — | — | 7,742 | 15,483 | 30,966 | — | — | — | 678,155 | |||||||||||||
2/27/19(3) | 2/27/19 | — | — | — | — | — | — | 15,483 | — | — | 1,356,311 | |||||||||||||
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Gerald Laderman | 2/27/19(1) | 2/27/19 | 380,983 | 761,966 | 1,523,932 | — | — | — | — | — | — | — | ||||||||||||
2/27/19(2) | 2/27/19 | — | — | — | 7,242 | 14,484 | 28,968 | — | — | — | 634,399 | |||||||||||||
2/27/19(3) | 2/27/19 | — | — | — | — | — | — | 14,484 | — | — | 1,268,798 | |||||||||||||
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Table2021, subject to the named executive officer's continued employment through the end of Contents
accordance with the terms of the underlying award agreements, and his separation agreement, Mr. Smisek remains eligible for vesting in the incentive awards based on actual performance during the performance period and pro-rated for the period in which he served the Company during the performance period.
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Narrative to 2019 Summary Compensation Table and Grants of Plan-Based Awards for 2019 Table |
The following is a description of material factors necessary to understand the information disclosed in the 20152019 Summary Compensation Table and the Grants of Plan-Based Awards for 20152019 table.
Employment AgreementArrangements with Mr. Munoz. On December 31, 2015, Mr. Munoz, the Company and United Airlines entered into an employment agreement memorializing the terms of Mr. Munoz's employment as President and Chief Executive Officer ofwith the Company and United Airlines. See "CD&A—CEO Agreements" above. The employment agreement has a term of five years from its effective date ofexpiring on September 8, 2015 (the "Employment Period"). During the Employment Period, Mr. Munoz shall serve as President and Chief Executive Officer of the Company and United Airlines and shall be the senior-most executive. In addition, the agreement provided that it was the Company's expectation that Mr. Munoz would be appointed Chairman of the Board at or before the Company's 2017 annual meeting of stockholders. On April 19, 2016, Mr. Munoz, the Company and United Airlines entered into an amendment to the employment agreement. The amendment, which was initiated by Mr. Munoz, provides, among other things, that it is the Company's expectation that Mr. Munoz will be appointed Chairman of the Board at the Company's 2018 annual meeting of stockholders.
Compensation.2020. Pursuant to the employment agreement, Mr. Munoz receives an initiala base salary of $1,250,000 per year. Beginning in 2016, Mr. Munoz is eligible to participateyear and participates in the Company's annual cash bonus program, with a minimum target annual bonus not less thanequal to 200% of his annual base salary. Mr. Munoz did not receive an Annual Incentive Program awardThe agreement also provides for 2015. Also beginning in 2016, the Company will provide Mr. Munoz an annual long-term incentive award with a target grant date value of at least $10.5 million,$10,500,000, to be delivered through vehicles and designs that are generally consistent with those awarded to the Company's other senior executive officers in each year. However,For 2019, the Committee granted Mr. Munoz is not eligible to receive a long-term incentive award for calendar 2016 until he has been in continuous active service as President and Chief Executive Officer for a period of six months. Mr. Munoz did not receive any long-term incentive awards in 2015. In considerationwith a target value of $10,750,000.
On December 4, 2019, the commencementCompany and United Airlines entered into a transition agreement with Mr. Munoz (the "Transition Agreement") reflecting the terms and conditions of Mr. Munoz's employment, and in parttransition from CEO to compensatethe role of Executive Chairman. Under the Transition Agreement, Mr. Munoz for equity awards forfeitedwill continue to serve as CEO and prospective compensation opportunities ata director of the Company through the Annual Meeting date and during this period his prior employer,employment continues to be governed by the terms and conditions of his employment agreement. The Transition Agreement contemplates that Mr. Munoz will serve as Executive Chairman and remain a director of the Company until the date of the Company's 2021 Annual Meeting of Stockholders. Other terms of the Transition Agreement are described in the CD&A above.
2019 Special Premium-Priced Stock Option Award to Mr. Kirby. As noted in the tables above, Mr. Kirby received a sign-on cash payment of $5.2 million. This amount is includedspecial stock option award in December 2019 in connection with his selection to succeed Mr. Munoz in the Bonus columnCEO role following the Annual Meeting. This award was granted by the Committee following discussion and consideration of compensation levels in the peer group and industry peers, as described in the CD&A under "—Compensation Process and Oversight—Benchmarking." The options have a ten-year term and vest in accordance with the following schedule: (i) 11% of the 2015 Summary Compensation Tableoptions will vest on May 20, 2023; (ii) 22% of the options will vest on May 20, 2024; (iii) 22% of the options will vest on May 20, 2025; (iv) 22% of the options will vest on May 20, 2026; (v) 11% of the options will vest on
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62 | | | | 2020 Proxy Statement | | |
May 20, 2027; and is subject to repayment if Mr. Munoz is terminated for cause or resigns without good reason within the first year of his employment. Mr. Munoz's sign-on compensation also includes a time-based restricted share award which was granted in February 2016 at the same time as the Company's 2016 annual equity awards to similarly situated executive officers. This sign-on award has a grant date value of $6.8 million with vesting to occur in three equal installments on the first three anniversaries(vi) 12% of the grant date andoptions will be included invest on May 20, 2028. Mr. Kirby must remain employed through the Company's 2016 Summary Compensation Table.
Other Benefits and Payments. Under the employment agreement, Mr. Munoz is entitled to reimbursement for reasonable expenses associated with traveling between his current home and Chicago, Illinois and securing temporary housing in Chicago, Illinois. Reimbursement is available up to a maximum of (i) $20,000 per month for the first nine months of the Employment Period and (ii) $10,000 per month for the next three months of the Employment Period. Mr. Munoz is also eligible for reimbursement for reasonable moving expenses incurred in connection with his relocation to Chicago in accordance with the Company's relocation policy for senior executive officers. The Other Annual Compensation column of the Summary Compensation Table includes 2015 relocation expenses for a temporary apartment and parking in Chicago. It is the expectation of Mr. Munoz and the Company that Mr. Munoz will relocate to Chicago within 18 months of the effectivevesting date of the options, with limited exceptions for vesting in full in the case of death, disability, or upon a qualifying termination of employment agreement. Mr. Munoz also is entitled to reimbursement for additional expenses related to hiswithin two years following a change in employment and relocation, including matters such as reasonable legal fees, tax planning, financial advisory services, home security and estate planning, up to a maximum of $75,000, which will be reimbursed in 2016.
Severance. If Mr. Munoz is terminated without "cause" or if Mr. Munoz resigns with "good reason," then Mr. Munoz is entitled to certain payments and benefits, including the following: (i) a cash payment of two times his then-existing base salary plus target level bonus, (ii) full vesting of the time vested equity award granted in February 2016, (iii) pro-rata payment of his annual bonus for the year of termination (calculated based on actual achievement of performance goals), and (iv) continuation of welfare benefits for two years.
Other Terms and Conditions. Mr. Munoz is bound by certain non-solicitation and non-competition restrictions during the term of his employment and for a period of one year thereafter. In addition, the terms of the "cause" and "good reason" definitions are consistent with those contained in the Executive Severance Plan and applicable to the Company's executive vice presidents. See "Potential Payments Upon Termination or Change in Control—Material Defined Terms" below.control.
20152019 Incentive Compensation Awards
The individual target level opportunities under the 20152019 annual and long-term incentive compensation awards were expressed as a percentage of the executives' base salary earned during the year. These incentive awards are described below.
Annual Incentive Awards. As discussed in the CD&A, during 2015,2019, each of the named executive officers (except Mr. Munoz) participated in the AIP, an annual cash incentive plan adopted pursuant to the Company's 2017 Incentive Plan 2010.Compensation Plan. The 20152019 AIP award opportunities were as follows: entry—45%50% of targeted value; target—100% of targeted value; and stretch—200% of targeted value. Our 2015In addition, the 2019 awards include an "individual performance modifier" of between 0-150%, provided, however, that in all circumstances the maximum payment level under the 2019 AIP awards was 200% of the targeted value. The combined 2019 performance relating to pre-tax income, D:00, customer satisfaction goals and net promoter score ("NPS") goals resulted in achievement at 186.67%of 105% of the total target opportunity level andunder the Committee exercised negative discretion to reduce the payments to the named executive officers by fifteen percentage points, which resulted in payout at 171.67% of the target opportunity level.AIP. As discussed in the CD&A under "2015 Key"2019 Compensation Components—2019 Annual Incentive Awards," the Compensation Committee exercised negative discretion, as provided under the AIP design, the Committee retained discretion to reduceadjust the amount of Mr. G. Hart's 2015 annual incentive compensation by $1,000,000 based onAIP payouts through the September 8, 2015 recommendationapplication of the Special Committee. Mr. Smisek received pro-rated payment of his 2015 AIP award pursuantindividual performance modifier and the Committee applied individual performance modifiers ranging from 100% to the terms of his separation agreement. Mr. Rainey forfeited his award in
connection with his resignation. The annual incentive award amounts paid to120% for the named executive officersofficers. Payments under the AIP are included in the 2019 Summary Compensation Table under the column captioned "Non-Equity Incentive Plan Compensation" column in the 2015 Summary Compensation Table.Compensation." Please see "2015 Key"2019 Compensation Components—2019 Annual Incentive Awards" in the CD&A above for further information regarding the operation of the AIP, including the 2015 performance measures.AIP.
Long-Term Incentive Awards. As discussed in the CD&A, the 2015 target2019 targeted long-term incentive opportunity for each of the named executive officers was divided into one-third increments and granted in the form of the following long-term incentive awards:
Each of these awards is structured with (ii) time-vested RSUs vesting equally over a three-year performance or vesting period.period (stock-settled). Please see "2015 Key"2019 Compensation Components—20152019 Long-Term Incentive Awards" in the CD&A above for further information regarding the long-term incentive awards, including the establishment of the 20152019 opportunity levels and discussion of the applicable performance measures.
Performance-Based RSUs. The Compensation Committee adopted the RSU Program in 2011, pursuant to the provisions of the Company's 2008 Incentive Compensation Plan. For 2015,2019, the Committee established two forms ofgranted pre-tax margin Performance-Based RSU awards:
Subject to achievement of the specified performance conditions, the Performance-Based RSUs are cash settled based on the average closing price per share of Common Stock for the 20 trading days immediately preceding the end of the performance period.stock-settled. Participants must remain continuously employed through the end of the performance period to receive a payment,shares, with limited exceptions for pro-rata paymentsvesting in the case of death, disability, retirement, and certain involuntary termination events.following a change in control.
Restricted Share Awards.Time-vested RSUs. The final one-thirdother one-half of the 20152019 long-term incentive target level opportunity was delivered in the form of restricted sharetime-vested RSUs. These awards granted pursuant to the Company's 2008 Incentive Compensation Plan. These shares are scheduled to vest in one-third increments on February 28, 2016, 20172020, 2021 and 2018,2022, subject to continued employment through each vesting date. The 2015 restricted share awards2019 RSUs vest in full upon the holder's death or disability and, in accordance with Mr. Smisek's employment agreement,disability. Upon retirement, the restricted shares vestedRSUs vest on a pro-rata basis in connection with his separation fromrespect to the Company.portion of the award scheduled to vest on the next vesting date. The holder of restricted sharesRSUs will be eligible to receive any dividends or other distributions paid or distributed with respect to the restricted shares subject to such RSUs at the time the restricted sharesRSUs vest, if at all. In consideration of the 2015 restricted share2019 RSU awards, the award agreements include restrictive covenants, including post-separation obligations related to confidentiality, non-competition and non-solicitation.
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Outstanding Equity Awards at 2015 Fiscal Year-End
Outstanding Equity Awards at 2019 Fiscal Year-End |
The following table presents information regarding the outstanding equity awards held by each named executive officer as of December 31, 2015.2019. In accordance with SEC reporting requirements, if performance through 20152019 has exceeded the entry level, then the year-end number of Performance-Based RSUs that have not vested and the related payout value shown in the table below is based on achieving the next higher performance measure that exceeds the performance achieved through the 20152019 fiscal year. For purposes of the table below, the 2018 and 2019 Performance-Based RSUs were estimated above the target levels at year-end and therefore are shown at the "stretch" level (200% of the target opportunity). The final determination of the payout value of each award will be made based upon the achievement of the specified performance conditions and the value of the Common Stock at the time of vesting.
| Option Awards | Stock Awards | |||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Name | Number of Securities Underlying Unexercised Options (#)Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | |||||||||||||||||
Oscar Munoz(1) | 5,250 | — | 22.50 | 6/6/16 | — | — | — | — | |||||||||||||||||
5,250 | — | 32.48 | 6/12/17 | — | — | — | — | ||||||||||||||||||
7,875 | — | 11.87 | 6/12/18 | — | — | — | — | ||||||||||||||||||
7,875 | — | 8.79 | 6/10/19 | — | — | — | — | ||||||||||||||||||
— | 2,361.61 | (2) | 135,320 | (2) | |||||||||||||||||||||
Brett Hart | — | — | — | — | 6,004 | (3) | 344,029 | (6) | — | — | |||||||||||||||
— | — | — | — | 7,343 | (4) | 420,754 | (6) | — | — | ||||||||||||||||
— | — | — | — | 7,681 | (5) | 440,121 | (6) | — | — | ||||||||||||||||
— | — | — | — | — | — | 24,476 | (7) | 1,402,475 | (10) | ||||||||||||||||
— | — | — | — | — | — | 15,362 | (8) | 880,243 | (10) | ||||||||||||||||
— | — | — | — | — | — | 7,311 | (9) | 418,920 | (10) | ||||||||||||||||
Gerald Laderman | — | — | — | — | 4,289 | (3) | 245,760 | (6) | — | — | |||||||||||||||
— | — | — | — | 5,135 | (4) | 294,235 | (6) | — | — | ||||||||||||||||
— | — | — | — | 4,997 | (5) | 286,328 | (6) | — | — | ||||||||||||||||
— | — | — | — | — | — | 17,116 | (7) | 980,747 | (10) | ||||||||||||||||
— | — | — | — | — | — | 9,994 | (8) | 572,656 | (10) | ||||||||||||||||
— | — | — | — | — | — | 4,756 | (9) | 272,519 | (10) | ||||||||||||||||
James Compton | — | — | — | — | 9,456 | (3) | 541,829 | (6) | — | — | |||||||||||||||
— | — | — | — | 11,322 | (4) | 648,751 | (6) | — | — | ||||||||||||||||
11,629 | (5) | 666,342 | (6) | — | — | ||||||||||||||||||||
— | — | — | — | — | — | 37,742 | (7) | 2,162,617 | (10) | ||||||||||||||||
— | — | — | — | — | — | 23,258 | (8) | 1,332,683 | (10) | ||||||||||||||||
— | — | — | — | — | — | 11,070 | (9) | 634,311 | (10) | ||||||||||||||||
Gregory Hart | — | — | — | — | 2,959 | (3) | 169,551 | (6) | — | — | |||||||||||||||
— | — | — | — | 7,702 | (4) | 441,325 | (6) | — | — | ||||||||||||||||
— | — | — | — | 9,131 | (5) | 523,206 | (6) | — | — | ||||||||||||||||
— | — | — | — | — | — | 25,674 | (7) | 1,471,120 | (10) | ||||||||||||||||
— | — | — | — | — | — | 18,262 | (8) | 1,046,413 | (10) | ||||||||||||||||
— | — | — | — | — | — | 8,692 | (9) | 498,052 | (10) | ||||||||||||||||
Michael Bonds | — | — | — | — | 5,436 | (3) | 311,483 | (6) | — | — | |||||||||||||||
— | — | — | — | 6,509 | (4) | 372,966 | (6) | — | — | ||||||||||||||||
— | — | — | — | 6,788 | (5) | 388,952 | (6) | — | — | ||||||||||||||||
— | — | — | — | — | — | 21,696 | (7) | 1,243,181 | (10) | ||||||||||||||||
— | — | — | — | — | — | 13,576 | (8) | 777,905 | (10) | ||||||||||||||||
— | — | — | — | — | — | 6,461 | (9) | 370,215 | (10) | ||||||||||||||||
Jeffery Smisek(11) | — | — | — | — | — | — | 102,871 | (7) | 5,894,508 | (10) | |||||||||||||||
— | — | — | — | — | — | 24,471 | (8) | 1,402,188 | (10) | ||||||||||||||||
— | — | — | — | — | — | 11,647 | (9) | 667,373 | (10) | ||||||||||||||||
John Rainey(11) | — | — | — | — | — | — | — | — |
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Option Awards | Stock Awards | |||||||||||||||
| | | | | | | | | | | | | | | | |
Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable) | Option Exercise Price ($) | Option Expiration Date | Number of Shares or Units of Stock That Have Not Vested (#) | Market Value of Shares or Units of Stock That Have Not Vested ($) | Equity Incentive Plan Awards; Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) | Equity Incentive Plan Awards; Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($) | ||||||||
Oscar Munoz | — | — | — | — | 23,472(1) | 2,067,648(4) | — | — | ||||||||
— | — | — | — | 52,474(2) | 4,622,435(4) | — | — | |||||||||
— | — | — | — | 61,359(3) | 5,405,114(4) | — | — | |||||||||
— | — | — | — | — | — | 157,422(5) | 13,867,304(7) | |||||||||
— | — | — | — | — | — | 122,718(6) | 10,810,229(7) | |||||||||
| | | | | | | | | | | | | | | | |
J. Scott Kirby | — | 306,865(8) | 110.21 | 12/4/29 | — | — | — | — | ||||||||
158,479(9) | — | 58.69 | 8/29/23 | — | — | — | — | |||||||||
— | 159,321(9) | 58.69 | 8/29/26 | — | — | — | — | |||||||||
— | — | — | — | 12,225(1) | 1,076,900(4) | — | — | |||||||||
— | — | — | — | 27,331(2) | 2,407,588(4) | — | — | |||||||||
— | — | — | — | 34,961(3) | 3,079,714(4) | — | — | |||||||||
— | — | — | — | — | — | 81,992(5) | 7,222,675(7) | |||||||||
— | — | — | — | — | — | 69,922(6) | 6,159,429(7) | |||||||||
| | | | | | | | | | | | | | | | |
Gregory L. Hart | — | — | — | — | 5,665(1) | 499,030(4) | — | — | ||||||||
— | — | — | — | 12,744(2) | 1,122,619(4) | — | — | |||||||||
— | — | — | — | 16,981(3) | 1,495,856(4) | — | — | |||||||||
— | — | — | — | — | — | 38,232(5) | 3,367,857(7) | |||||||||
— | — | — | — | — | — | 33,962(6) | 2,991,713(7) | |||||||||
| | | | | | | | | | | | | | | | |
Brett J. Hart | — | 21,521(10) | 77.56 | 6/14/27 | — | — | — | — | ||||||||
— | — | — | — | 9,670(11) | 851,830(4) | — | — | |||||||||
— | — | — | — | 5,182(1) | 456,482(4) | — | — | |||||||||
— | — | — | — | 11,620(2) | 1,023,606(4) | — | — | |||||||||
— | — | — | — | 15,483(3) | 1,363,897(4) | — | — | |||||||||
— | — | — | — | — | — | 34,858(5) | 3,070,641(7) | |||||||||
— | — | — | — | — | — | 30,966(6) | 2,727,795(7) | |||||||||
| | | | | | | | | | | | | | | | |
Gerald Laderman | — | — | — | — | 2,281(1) | 200,933(4) | ||||||||||
— | — | — | — | 6,630(2) | 584,037(4) | — | — | |||||||||
— | — | — | — | 14,484(3) | 1,275,896(4) | — | — | |||||||||
— | — | — | — | — | — | 19,890(5) | 1,752,110(7) | |||||||||
— | — | — | — | — | — | 28,968(6) | 2,551,791(7) | |||||||||
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Option Exercises and Stock Vested for 2015
Option Exercises and Stock Vested for 2019 |
The following table presents information regarding option exercises and the vesting of restricted shareshares, RSUs and RSU awardsPerformance-Based RSUs during 2015. There were no option exercises by the named executive officers during 2015. 2019.
| | | | | | | | |
| Option Awards | Option Awards | Stock Awards | |||||
| | | | | | | | |
Name | Number of Shares Acquired on Exercise (#) | Value Realized on Exercise ($) | Number of Units Vesting (#) | Value Realized on Vesting ($) | ||||
Oscar Munoz | | 7,875(1) | | 579,482(1) | | — | | — |
| — | | — | | 44,787(2) | | 3,955,140(2) | |
| — | | — | | 22,858(3) | | 2,007,161(3) | |
| — | | — | | 23,471(4) | | 2,060,989(4) | |
| — | | — | | 26,237(5) | | 2,303,871(5) | |
| — | | — | | 76,181(6) | | 6,748,875(6) | |
| | | | | | | | |
J. Scott Kirby | | — | | — | | 4,433(3) | | 389,262(3) |
| — | | — | | 12,225(4) | | 1,073,477(4) | |
| — | | — | | 13,665(5) | | 1,199,924(5) | |
| — | | — | | 39,678(6) | | 3,515,074(6) | |
| | | | | | | | |
Gregory L. Hart | | — | | — | | 4,274(3) | | 375,300(3) |
| — | | — | | 5,663(4) | | 497,268(4) | |
| — | | — | | 6,372(5) | | 559,525(5) | |
| — | | — | | 18,384(6) | | 1,628,639(6) | |
| | | | | | | | |
Brett J. Hart | | — | | — | | 3,595(3) | | 315,677(3) |
| — | | — | | 5,182(4) | | 455,031(4) | |
| — | | — | | 5,809(5) | | 510,088(5) | |
| — | | — | | 16,821(6) | | 1,490,172(6) | |
| | | | | | | | |
Gerald Laderman | | — | | — | | 15,000(7) | | 1,244,100(7) |
| — | | — | | 2,196(3) | | 192,831(3) | |
| — | | — | | 2,280(4) | | 200,207(4) | |
| — | | — | | 3,315(5) | | 291,090(5) | |
| — | | — | | 7,402(6) | | 655,743(6) | |
| | | | | | | | |
| Stock Awards | ||||||
---|---|---|---|---|---|---|---|
Name | Number of Units Vesting (#) | Value Realized on Vesting ($) | |||||
Oscar Munoz | 2,916.13 | (1) | 153,913 | (1) | |||
Brett Hart | 15,414 | (2) | 1,045,780 | (2) | |||
45,024 | (3) | 2,333,144 | (3) | ||||
Gerald Laderman | 11,469 | (2) | 779,062 | (2) | |||
32,160 | (3) | 1,666,531 | (3) | ||||
James Compton | 23,835 | (2) | 1,616,941 | (2) | |||
70,912 | (3) | 3,674,660 | (3) | ||||
Gregory Hart | 9,180 | (2) | 616,680 | (2) | |||
22,192 | (3) | 1,149,989 | (3) | ||||
Michael Bonds | 14,053 | (2) | 953,883 | (2) | |||
40,764 | (3) | 2,112,390 | (3) | ||||
Jeffery Smisek | 116,667 | (2) | 7,916,228 | (2) | |||
308,095 | (3) | 15,965,483 | (3) | ||||
60,746 | (4) | 3,493,502 | (4) | ||||
John Rainey | 17,442 | (2) | 1,181,810 | (2) |
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eligibility, Mr. Smisek's 2013 Performance-Based RSU awards were paid on a pro-rata basis through his separation date based on the Company's actual performance through the end of the performance period. Mr. Rainey forfeited his outstanding Performance-Based RSU awards in connection with his resignation from the Company.
2019 Pension Benefits Table |
Prior to the Merger,2010 merger, Continental Airlines maintained a SERP benefitsbenefit for Messrs.Mr. Laderman Compton, Bonds, and Smisek that provideprovides an annual retirement benefit expressed as a percentage of the executives'his final average compensation. The SERP is not a current element of the Company's compensation program. The SERP benefit for Messrs. Compton, Bonds, and Smisek was frozen as of December 31, 2010. The SERP benefit forFor Mr. Laderman, final average pay used in the SERP calculation was partially frozen as of December 31, 2010 and the SERP benefit was fully frozen as of December 31, 2013. The final average compensation used for calculatingMessrs. G. Hart and Laderman also participate in the SERP benefit values for each of these officers will be based on their compensation from Continental UAL or its affiliatesRetirement Plan ("CARP"), which was frozen as of December 31, 2010. None of these officers will receive additional service credit for purposes of the SERP benefit after December 31, 2010, except for Mr. Laderman, who will not receive additional service credit for purposes of his SERP benefit after December 31, 2013.
The following table sets forth information as of December 31, 20152019 for the continuing Continental named executive officersMessrs. G. Hart and Laderman concerning the present value of histheir accumulated benefits under (i) the CARP, which was frozen with respect to theall management and administrative employees, including officers, as of December 31, 2013 and, (ii) the SERP.with respect to Mr. Laderman, his SERP benefit. The SERP amounts shown in this proxy statement reflect an estimated Medicare tax indemnification that is expected to be paid by the Company in the year the named executive officerMr. Laderman retires or terminates.
Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
Gerald Laderman | CARP | 23.3 | 508,308 | 0 | ||||||||
SERP | 19.0 | 3,821,174 | 0 | |||||||||
James Compton | CARP | 18.9 | 453,672 | 0 | ||||||||
SERP | 16.0 | 4,329,448 | 0 | |||||||||
Gregory Hart | CARP | 15.4 | 232,583 | 0 | ||||||||
SERP | N/A | N/A | 0 | |||||||||
Michael Bonds | CARP | 18.9 | 328,679 | 0 | ||||||||
SERP | 5.6 | 636,960 | 0 | |||||||||
Jeffery Smisek(3) | CARP | 18.8 | 0 | 518,496 | ||||||||
SERP | 26.0 | 4,804,339 | 7,262,631 | |||||||||
John Rainey | CARP | 16.6 | 192,975 | 0 | ||||||||
SERP | N/A | N/A | 0 |
| | | | | | | | | | |||||||||
Name | Plan Name | Number of Years of Credited Service (#)(1) | Present Value of Accumulated Benefit ($)(2) | Payments During Last Fiscal Year ($) | | |||||||||||||
Gregory L. Hart | | CARP | | | 15.4 | | | | 354,639 | | | | 0 | | | |||
| | | | | | | | | | |||||||||
Gerald Laderman | | CARP | | | 23.3 | | | | 717,890 | | | | 0 | | | |||
| SERP | | | 19.0 | | | | 4,155,395 | | | | 0 | | | ||||
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Narrative to Pension Benefits Table
| Measurement Date | |||||
---|---|---|---|---|---|---|
Assumption | 12/31/2013 | 12/31/2014 | 12/31/2015 | |||
Discount Rate and Lump Sum Interest Rate: | ||||||
• CARP | 5.26% | 4.31% | 4.70% | |||
• SERP | 5.09% | 4.19% | 4.63% | |||
Lump Sum Election | 100% | 100% | 100% | |||
Pre-retirement Turnover | None | None | None | |||
Mortality Assumption: | ||||||
• Pre-retirement | None | None | None | |||
• Lump Sum | 2014 IRS 417(e) Table | 2015 IRS 417(e) Table | 2016 IRS 417(e) Table | |||
Assumed Retirement Age (earliest unreduced age): | ||||||
• CARP | Age 65 | Age 65 | Age 65 | |||
• SERP | Age 60 (or current age if older) | Age 60 (or current age if older) | Age 60 (or current age if older) |
Narrative to Pension Benefits Table |
| | | | | | |
Measurement Date | ||||||
| | | | | | |
Assumption | 12/31/2017 | 12/31/2018 | 12/31/2019 | |||
Discount Rate and Lump Sum Interest Rate: |
|
|
| |||
• CARP | 3.76% | 4.33% | 3.64% | |||
• SERP | 4.29% | 4.40% | 4.40% | |||
Lump Sum Election | 100% | 100% | 100% | |||
Pre-retirement Turnover | None | None | None | |||
Mortality Assumption: | ||||||
• Pre-retirement | None | None | None | |||
• Lump Sum—CARP | 2019 IRS 417(e) Table | 2019 IRS 417(e) Table | 2021 IRS 417(e) Table | |||
• Lump Sum—SERP | 2017 IRS 417(e) Table | 2019 IRS 417(e) Table | 2019 IRS 417(e) Table | |||
Assumed Retirement Age (earliest unreduced age): | ||||||
• CARP | Age 65 | Age 65 | Age 65 | |||
• SERP | Age 60 (or current age if older) | Age 60 (or current age if older) | Age 60 (or current age if older) | |||
| | | | | | |
CARP. The CARP is a non-contributory, defined benefit pension plan in which substantially all of Continental's non-pilot domestic employees (including Messrs. Laderman, Compton, G. Hart. Bonds, Smisek,Hart and Rainey)Laderman) were entitled to participate. During 2015,2019, the Company contributed $800$635 million to its tax qualified U.S. defined benefit pension plans, including $750 million contributed tothe CARP.
Effective December 31, 2013, the Company froze benefit accruals inunder the CARP for all management and administrative employees, including Messrs. Laderman, Compton, G. Hart Bonds, Smisek, and Rainey.Laderman. Effective January 1, 2014, all management and administrative employees of the Company, including the named executive officers, participate in a defined contribution plan.plans. In addition, management employees with compensation in excess ofgreater than the tax-qualified plan limit, including these officers, participate in the United Airlines, Inc. Management Cash Direct & Cash Match Program. The Company's decision to freeze the CARP was part of the Company's continuing efforts to standardize management and administrative benefits post-Merger.following the 2010 merger with Continental.
The CARP benefit is based on a formula that utilizes final average compensation and service while one iswas an eligible employee of Continental. Compensation used to determine benefits is regular pay, which includes salary deferral elections under broad-based employee programs (such as Continental's
United's 401(k) plan), but excludes bonuses, taxable income derived from group term life insurance, payments pursuant to profit sharing plans, and any form of non-cash or incentive compensation. A limit of $170,000 is applied to each year of compensation. Final average compensation is based on the highest consecutive five calendar years of compensation of the ten most recent calendar years of employment. The final average compensation used to calculate the frozen accrued CARP benefit for Messrs. Laderman, Compton, G. Hart Bonds, Smisek, and RaineyLaderman is $170,000.
The benefit under the CARP is calculated as (A) times (B), where:
Normal retirement under the CARP is age 65, but a participant is entitled to receive a reduced benefit after attaining either age 55 with 10 years of service or age 50 with 20 years of service. The early retirement benefit is the same as the normal retirement benefit, but actuarially reduced from age 65 to the
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early retirement age. Messrs. Laderman, Compton,G. Hart and BondsLaderman were eligible for early retirement as of December 31, 2015, and Mr. Smisek was eligible for early retirement at the date of his separation from the Company.2019.
The CARP benefit can be received as a single life annuity or an actuarially equivalent contingent annuity with 50%, 662/3%, 75%, or 100% of the participant's payments continuing for the life of the surviving spouse following the participant's death, or as an actuarially equivalent lump sum. The lump sum payment option is not available if the participant terminates before being eligible for either normal or early retirement.
Frozen SERP. The SERP benefitsbenefit originally werewas granted in connection with Messrs. Laderman, Compton, Bonds, and Smisek'sMr. Laderman's employment agreementsagreement with Continental and will be offset by amounts paid or payable under the CARP. These benefits are not protected from bankruptcy, are subject to the rights of creditors of the Company, and are not protected by the Pension Benefit Guaranty Corporation. Continental provided the SERP benefits to address the compensation limits under CARP and to encourage retention by enhancing the financial value of continued employment with Continental. As of December 31, 2010, SERP benefits were frozen for Messrs. Compton, Bonds, and Smisek. Mr. Laderman's SERP benefit was partially frozen as of December 31, 2010 and fully frozen as of December 31, 2013.
Payouts under the SERP are based on final average compensation, which was frozen as of December 31, 2010 for all SERP participants, and credited years of service, which werewas frozen as of December 31, 2010 for Messrs. Compton, Bonds, and Smisek and as of December 31, 2013 for Mr. Laderman. Under the SERP, final average compensation means the greater of a specified minimum amount or the average of the participant's highest five years of compensation during their last ten calendar years through the 2010 freeze date. For purposes of such calculation, compensation includes salary and cash bonuses but excludes certain stay bonus amounts, any terminationother award payments, payments under the Continental Officer Retention and Incentive Award Program (which has been terminated),such as proceeds from awards under any option or stock incentive plan and any cash awards paid under a long termlong-term incentive plan. The final average compensation used to calculate the frozen SERP accrued benefit is $655,357 for Mr. Laderman $789,860 for Mr. Compton, $557,112 for Mr. Bonds, and $1,279,909 for Mr. Smisek.
Creditedcredited years of service recognized under the SERP began January 1, 2000 for Mr. Laderman. Mr. Laderman January 1, 2001 for Mr. Compton, June 16, 2005 for Mr. Bonds, and January 1, 1995 for Mr. Smisek. Messrs. Laderman, Compton, and Smisek received one additional credited yearsyear of service under the SERP for each actual year of service during a specificthe period of time as follows: from 2000 through 2004, one additional year for each year of service for Mr. Laderman and two additional years for each year of service for Mr. Smisek; from 2001 through 2006, one additional year for each year of service for Mr. Compton.2004. This additional service credit was provided as a retention incentive. The portion of the Present Value of Accumulated Benefits attributable to years of service credited under the SERP that are in excess ofgreater than actual years worked while participating in the SERP is as follows: $1,114,639$1,212,131 for Mr. Laderman, $1,739,307 for Mr. Compton, and $1,128,331 for Mr. Smisek. In addition, the portion of the benefit payment that Mr. Smisek received during 2015 attributable to years of service credited under the SERP that are in excess of actual years of service worked while participating in the SERP was $3,481,142.Laderman.
The benefit under the SERP is defined as a single life annuity, which is (a) times (b) minus (c), where:
The Company will increase the amount for the executive's portion of any Medicare payroll tax incurred in connection with the SERP payout (plus income taxes on such indemnity payment). This Medicare tax indemnity is expected to be paid in the year the executive terminates.
Normal retirement under the SERP is age 60, but an officer is entitled to receive a reduced benefit upon the earlier of attaining age 55 or completing 10 years of actual service under the SERP. The benefit is payable as a lump sum, which is the actuarial equivalent of the single life annuity benefit payable at age 60. The lump sum is calculated using the same mortality table that is useddisclosed in the CARP (currentlyfootnote to the financial statements for SERP (the Internal Revenue Service ("IRS") prescribed 417(e) table). It is also calculated using an interest rate that is the average of the Moody's Aa Corporate Bond rate for the three monththree-month period ending on the last day of the second month preceding payment.
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Potential Payments upon Termination or Change in Control |
This section quantifies and describes potential payments that may be made to Messrs. Munoz, B. Hart, Laderman, Compton, G. Hart and Bonds and our potential costs associated with providing them certain additional benefits that would be provided at, following, or in connection with certain terminationsnamed executive officers upon termination of employment or upon a change in control of the Company assuming that such event had occurred on December 31, 2015. For Messrs. Smisek and Rainey, this section quantifies and describes actual payments and estimated future payments and benefits based only on the triggering event that actually occurred in connection with their separations from the Company during 2015. These payment and benefits are described below under "—Departure of Messrs. Smisek and Rainey."2019.
For the continuing named executive officers, thisThis section does not quantify or include a description of payments that would be made upon certain qualifying terminations of employment or a change in control of the Company with respect tofor awards that already were earned or vested as of December 31, 2019, including (i) the last business day of2019 AIP awards and (ii) long-term incentive awards granted in 2017 for the year, which includes payments2017-2019 performance period. The 2019 AIP awards are included above under the following awards:
Termination Benefits of Mr. Munoz.Munoz; CEO Transition Agreement
AtAs described in the CD&A above, Mr. Munoz will transition from the role of CEO following the Annual Meeting and will assume the role of Executive Chairman. In connection with the transition, the Company entered into the Transition Agreement with Mr. Munoz to reflect the terms and conditions of the transition and Mr. Munoz's continued employment as Executive Chairman. As of December 31, 2015,2019, and continuing through the Annual Meeting, Mr. Munoz was eligible forMunoz's employment continues to be governed by the separationterms and conditions of his existing Employment Agreement and the table below reflects those benefits set forth underas of December 31, 2019. For further information related to the terms and conditions of the Transition Agreement, see "CD&A—CEO Transition Arrangements" above.
Pursuant to the terms of his employment agreement. In the event thatEmployment Agreement, if Mr. Munoz's employment is terminated by the Company without cause"cause" or if he resigns with "good reason," then Mr. Munoz will be entitled to certain payments and benefits, including the following: (i) a cash severance payment in the amount of $7.5 million (representing two times Mr. Mr. Munoz's then-existinghis base salary plus target bonus), (ii) full vesting of the initial equity award specified in the agreement (which had not been granted as of December 31, 2015), (iii); pro-rata payment of Mr. Munoz'shis annual bonus for the year of termination (which was not granted in 2015), based on actual achievement of performance targets,targets; and (iv) continuation of Mr. Munoz's welfare benefits for two years.
The Company's incentive awards also specify certain separation benefits and obligations. See "—Termination Due to Death or Disability," "—Involuntary Termination Without 'Cause' or Voluntary Termination for 'Good Reason'," and "—Change in Control" below for a description of the impact of termination on Mr. Munoz's outstanding incentive awards.
Mr. Munoz is bound by certain non-solicitation and non-competition restrictions during the term of his employment and for a period of one year thereafter. Mr. Munoz received a sign-on cash payment under his employment agreement of $5.2 million, which is subject to repayment if he is terminated for cause or resigns without good reason within the first year of his employment. Upon separation, Mr. Munoz retains lifetime flight benefits and a related tax indemnification, which benefits he retains from his prior service as a non-employee director of the Company. As of December 31, 2015,2019, Mr. Munoz iswas not retirement eligible and a change in
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control would not impact his compensation. See "—Material Defined Terms" below for a discussion of "cause" and "good reason" and "cause" definitions.
Estimate of Mr. Munoz's Potential Post-Employment Payments and Benefits at December 31, 2015 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Type of Payment or Benefit | Resignation without Good Reason ($)(1) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 7,500,000 | — | 7,500,000 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | — | — | — | 36,097 | — | 36,097 | |||||||||||||
Life Insurance | — | — | — | 1,231 | — | 1,231 | |||||||||||||
Perquisites | |||||||||||||||||||
Outplacement Services | — | — | — | 25,000 | — | 25,000 | |||||||||||||
Flight Benefits | 74,841 | 74,841 | 74,841 | 74,841 | — | 74,841 | |||||||||||||
Tax Indemnification on Flight Benefits | 284,336 | 284,336 | 284,336 | 284,336 | — | 284,336 |
| | | | | | | | | | | | | | | | | | | |
Estimate of Mr. Munoz's Potential Post-Employment Payments and Benefits at December 31, 2019 | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |
Type of Payment or Benefit | | Resignation without Good Reason($) | | Death ($) | | Disability ($) | | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | | Change In Control ($)(1) | | Change In Control With Qualifying Termination ($) | |||||||
Cash Severance | 0 | 0 | 0 | 7,500,000 | 0 | 7,500,000 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Long-Term Incentives | |||||||||||||||||||
Time-vested RSUs (2017, 2018 and 2019) | 0 | 12,095,197 | 12,095,197 | 0 | 0 | 12,095,197 | |||||||||||||
Performance-Based RSUs (2018-20) | 0 | 4,622,435 | 4,622,435 | 0 | 0 | 4,622,435 | |||||||||||||
Performance-Based RSUs (2019-21) | 0 | 1,801,705 | 1,801,705 | 0 | 0 | 1,801,705 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Continuation Coverage Benefits | |||||||||||||||||||
Health and Welfare | 0 | 0 | 0 | 42,082 | 0 | 42,082 | |||||||||||||
Life Insurance | 0 | 0 | 0 | 1,234 | 0 | 1,234 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Perquisites | |||||||||||||||||||
Outplacement Services | 0 | 0 | 0 | 25,000 | 0 | 25,000 | |||||||||||||
Flight Benefits | 132,215 | 0 | 132,215 | 132,215 | 0 | 132,215 | |||||||||||||
Tax Indemnification on Flight Benefits | 428,111 | 0 | 428,111 | 428,111 | 0 | 428,111 | |||||||||||||
| | | | | | | | | | | | | | | | | | | |
Termination Benefits of Messrs. B. Hart, Laderman, Compton, G. Hartunder the Executive Severance Plans and Bonds.Award Agreements
As of December 31, 2015,2019, Messrs. Kirby, G. Hart, B. Hart Compton, G. Hart and BondsLaderman were eligible for termination benefits pursuant to the Company's Executive Severance PlanPlan. The Company's incentive awards also specify benefits and Mr. Laderman was eligible for benefits pursuant to the Company's Senior Officer Severance Plan.obligations under certain separation scenarios. Below is a narrative description of potential payments
to each of theseour named executive officers upon (i) the following separation scenarios:
A tabular summary of the estimated payments and benefits for each of these officers as of December 31, 20152019 is set forth below the following narrative descriptions.descriptions of these scenarios. As of December 31, 2019, Messrs. G. Hart and Laderman were eligible to retire.
Termination for "Cause"
Upon a termination for "cause," our named executive officers are not entitled to any additional payments or benefits. However, upon any termination of employment, including a termination for "cause," Messrs.Mr. Laderman Compton and Bonds would retain theirhis frozen SERP benefits.
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| | 2020 Proxy Statement | | | | 71 |
July 1, 2016); Mr. Compton—$4,607,284 (payable partially on January 1, 2016 and partially on July 1, 2016); and Mr. Bonds—$685,364 (payable on July 1, 2016)2020). Assuming a termination on December 31, 20152019 due to death, the lump sum benefit would be as follows: Mr. Laderman—$1,838,673; Mr. Compton—$2,529,926; and Mr. Bonds—$308,676, and in each case the benefit would behave been $2,156,637, payable to the surviving spouse on January 1, 2016.2020. For purposes of these calculations, we have assumed that the lump sum interest rate in effect at the time of payment for those benefits payable after January 1, 20162020 will be the same as the assumption currently in effect (4.18%(3.14%). For the lump sum mortality assumption, we have used the 20162020 IRS prescribed 417(e) table.
Retirement or Resignation without "Good Reason"
Messrs. G. Hart and Laderman Compton, and Bonds were each retirement eligible on December 31, 20152019 and each would have beenwere entitled to the retirement benefits described below. Such benefits are in addition to theirthe frozen SERP benefitsbenefit of Mr. Laderman described above. Messrs. B. HartMunoz, Kirby and G.B. Hart were not retirement eligible as of December 31, 20152019 and therefore voluntary separation would occur uponbe treated as resignation without "good reason" (as defined in the Executive Severance Plan)Plan or, in the case of Mr. Munoz, his employment agreement). The only separation benefit provided to Messrs. B. HartMunoz and G.B. Hart in such circumstance iscircumstances would be lifetime flight benefits, including for Mr. Munoz the grandfathered tax indemnification on such benefits. Mr. Kirby was not eligible for lifetime flight benefits as of December 31, 2019 because such benefits require five years of Company service.
As an estimate of the future paymentpayments to Messrs. Laderman, Compton,G. Hart and Bonds,Laderman, the termination tables set forth below include (i) two-thirds of the target opportunity under the 2014 LTRP, (ii) one-third of theestimated value of the 20152018 relative pre-tax margin PBPerformance-Based RSUs assuming that the awards meet the target level of performance, (iii) two-thirds of the value of the 2014 ROIC PB RSU awards assuming that the awards meet the stretch level of
performance and (iv)(ii) one-third of the estimated value of the 2015 ROIC PB RSU awards2019 relative pre-tax margin Performance-Based RSUs assuming that the awards meet the stretch level of performance. The estimated payout value ofThese calculations are based on the 2014estimates used in the Outstanding Equity Awards at 2019 Fiscal Year-End table and 2015 PB RSUs was determined based on the closing price per share of Common Stock on December 31, 20152019 ($57.30)88.09). Vested pre-tax marginSubject to achievement of the specified performance conditions, the 2019 Performance-Based RSUs are settled in stock and ROIC PBthe 2018 Performance-Based RSUs will be settledare cash-settled based on the average closing price per share of Common Stock overfor the 20 trading days atimmediately preceding the end of the performance period, but may not exceed the maximum payment amount established by the Compensation Committee for the applicable award. The maximum payment amount applicable to the 2014 ROIC PB RSU awards is $86.56 per unit. The other RSU awards do not have a maximum payment amount. The pre-tax margin and ROIC RSU awards outstanding at December 31, 2015 are set forth in the Outstanding Equity Awards at 2015 Fiscal Year-End table.period.
No amounts are payable under the LTRP awards or the Performance-Based RSU awards in connection withupon a voluntary resignation without "good reason" and therefore no amounts have been included for these awards under this scenario for Messrs. B. HartMunoz, Kirby and G.B. Hart.
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Termination Due to Death or Disability
If a named executive officer was terminated employment due to death or disability on December 31, 2015,2019, in addition to applicable benefits as described above, he would have been entitled to the following benefits:
The estimated payout value of the payments to Messrs. B. Hart, Laderman, Compton, G. Hart,2018 and Bonds. The value of each pre-tax margin and ROIC PB RSU2019 Performance-Based RSUs was
determined based on the sameclosing price per share of Common Stock on December 31, 2019 ($88.09). The 2019 Performance-Based RSUs are settled in stock and the 2018 Performance-Based RSUs are cash-settled based on the average closing price assumptions as includedper share of Common Stock for the retirement and resignation scenario and described above.20 trading days immediately preceding the end of the performance period. The pre-tax margin Performance-Based RSU awards outstanding at December 31, 2019 are set forth in the Outstanding Equity Awards at 2019 Fiscal Year-End table based on the stretch level of performance.
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| | 2020 Proxy Statement | | | | 73 |
Involuntary Termination Without "Cause" or Voluntary Termination for "Good Reason"
If any of the named executive officers was terminated by the Company without "cause" or terminated voluntarily for "good reason" (as defined in the applicable severance plan)Company's Executive Severance Plan) on December 31, 2015,2019, in addition to the applicable benefits described above, (including payments under outstanding awards with respect to the named executive officers who are retirement eligible and excepting disability benefits or life insurance payments and except as modified below), he would have been entitled to the following:
The estimated severance payments included in the tables are calculated using the target opportunity percentages referenced above which were in effect as of December 31, 2019. However, in an actual separation event, if the officer was expected to be a named executive officer for the year of termination, then the Executive Severance Plan specifies that the payment calculation uses the target opportunity percentage that was applicable in the year prior to the separation event. To the extent permitted under Section 409A of the Code, the severance payment is made in one lump sum payment. Ifpayment and, if the severance payment is subject to a six-month delay, interest will be paid on the delayed payment.
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If a "change in control" of the Company had occurred on December 31, 2015, except as noted below with respect to retirement eligible participants,2019, generally no payments or benefits arewould have been provided to the named executive officers unless there iswere also a qualifiedqualifying termination of employment.employment or as noted below. A "qualifying termination" includes involuntary termination without "cause" and voluntary termination for "good reason". These payments and benefits are generally similar tothe same as those provided upon a qualifiedqualifying termination in the absence ofwithout a change in control. For purposes of the termination tables set forth below, "qualifying event" includes involuntary termination without "cause," voluntary termination for "good reason," death, disability and attainment of retirement eligibility. However, the health and welfare benefits would be provided to Messrs. B. Hart, Compton, G. Hart, and Bonds only upon involuntary termination without "cause" or voluntary termination for "good reason" or if eligible at December 31, 2015, upon retirement.
The outstanding restricted sharetime-vested RSU awards include a double-trigger with respect to a change in control, with vesting accelerated only if the holder terminates for "good reason" or upon a qualifying eventtermination within two years of the change in control. The outstanding LTRP awards and pre-tax margin and ROIC PBPerformance-Based RSU awards also include double-trigger provisions. Pursuant toprovisions and upon such awards,trigger the performance goals would be deemed satisfied at the target level of performance, which was specified by the Compensation Committee as the change in control level of performance at the time the awards were granted.level. Payments would be subject torequire continued employment through the end of the performance period except in situations involving a qualifying termination event, death disability or with respect todisability. To satisfy requirements of Section 409A of the Code, a retirement eligible participant, whoholder of Performance-Based RSUs would be eligible for an annual pro-rata payment. Payments with respect to the 2014 LTRP2018 and 2014 and 2015 PB RSU awards2019 Performance-Based RSUs would be made on a pro-rated basis to each of the named executive officers upon a qualifying termination event, death or disability. The sign-on stock option awards granted to Mr. Kirby (which have an exercise price that was set 25% higher than the closing price on the date of grant) would vest upon a change in control without a separate termination event. The stock option awards granted to Mr. Kirby in connection with the CEO transition and the stock options held by Mr. Hart would only accelerate vesting if such executive experiences a qualifying termination within two years following a change in control.
None of our named executive officers will be entitled to indemnification with respect to excise taxes under Section 4999 of the Code for a change in control. Instead, payments to each named executive officer that would be subject to the excise tax will be reduced to the level at which the excise tax will not be applied unless suchthe executive would be in a better net after-tax position by receiving the full payments and paying the excise tax.
The terms "cause" and "good reason" as used above are defined under Mr. Munoz's employment agreement, as amended, and the Executive Severance Plan and the Senior Officer Severance Plan with respect to the remaining named executive officers and are set forth below.
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| | 2020 Proxy Statement | | | | 75 |
Table of a Chairman of the Board other than Mr. Henry L. Meyer, Mr. Robert A. Milton or Mr. Munoz;Contentsprovided that such an appointment will not be "good reason" if the simultaneous holding of the offices of both Chief Executive Officer and Chairman of the Board is prohibited by the Company's Bylaws, Certificate of Incorporation, the New York Stock Exchange or applicable law.
Restrictive Covenants and Release Requirement
The 2014Our restricted share awards and 2015 restricted sharetime-vested RSU awards include restrictive covenants related to non-solicitation, non-competition and no-hire provisions for a period of one year following termination of employment (except, with respect to the non-competition covenant, if such termination is an involuntary termination by the Company without "cause" or by the executive for "good reason"). Similar restrictive covenants apply under the employment agreement of Mr. Munoz, under the terms of the stock option award granted to Mr. Kirby in 2019, and there are relatedpursuant to surviving obligations under the prior employment agreements withbetween the Company and Messrs. G. Hart, B. Hart Laderman, Compton, G. Hart, and Bonds.Laderman. In addition, each of the above named executives officers is bound by an obligation of confidentiality for an indefinite duration. The Company's officer severance plansExecutive Severance Plan and Mr. Munoz's employment agreement contain a requirement to execute a release of claims in favor of the Company to receive the separation benefits described herein.
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Estimate of Mr. Kirby's Potential Post-Employment Payments and Benefits as of December 31, 2019 | ||||||||||||
| | | | | | | | | | | | |
Type of Payment or Benefit | Resignation without Good Reason ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Termination ($) | ||||||
Cash Severance | 0 | 0 | 0 | 3,937,500 | 0 | 3,937,500 | ||||||
| | | | | | | | | | | | |
Long-Term Incentives | ||||||||||||
Time-vested RSUs (2017, 2018 and 2019) | 0 | 6,564,202 | 6,564,202 | 0 | 0 | 6,564,202 | ||||||
Performance-Based RSUs (2018) | 0 | 2,407,559 | 2,407,559 | 0 | 0 | 2,407,559 | ||||||
Performance-Based RSUs (2019) | 0 | 1,026,572 | 1,026,572 | 0 | 0 | 1,026,572 | ||||||
| | | | | | | | | | | | |
2016 Sign-on Stock Option Awards | 0 | 4,684,037 | 4,684,037 | 0 | 4,684,037 | 4,684,037 | ||||||
| | | | | | | | | | | | |
2019 Transition Stock Option Award | 0 | 0 | 0 | 0 | 0 | 0 | ||||||
| | | | | | | | | | | | |
Continuation Coverage Benefits | ||||||||||||
Health and Welfare | 0 | 0 | 0 | 42,170 | 0 | 42,170 | ||||||
Life Insurance | 0 | 0 | 0 | 1,236 | 0 | 1,236 | ||||||
| | | | | | | | | | | | |
Perquisites | ||||||||||||
Outplacement Services | 0 | 0 | 0 | 25,000 | 0 | 25,000 | ||||||
| | | | | | | | | | | | |
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76 | | | | 2020 Proxy Statement | | |
in order to receive the above described separation benefits (other than the frozen SERP benefits, if applicable).
Estimate of Mr. B. Hart's Potential Post-Employment Payments and Benefits as of December 31, 2015 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Type of Payment or Benefit | Resignation without Good Reason ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 3,360,500 | — | 3,360,500 | |||||||||||||
Long-Term Incentives | |||||||||||||||||||
LTRP Award (2014) | — | 317,778 | 317,778 | — | — | 317,778 | |||||||||||||
Pre-tax Margin PB RSUs (2015) | — | 139,640 | 139,640 | — | — | 139,640 | |||||||||||||
ROIC PB RSUs (2014 and 2015) | — | 614,199 | 614,199 | — | — | 614,199 | |||||||||||||
Restricted Shares (2013, 2014 and 2015) | — | 1,204,904 | 1,204,904 | — | — | 1,204,904 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | — | — | — | 69,695 | — | 69,695 | |||||||||||||
Life Insurance | — | — | — | 1,233 | — | 1,233 | |||||||||||||
Perquisites | |||||||||||||||||||
Outplacement Services | — | — | — | 25,000 | — | 25,000 | |||||||||||||
Flight Benefits | 29,244 | 29,244 | 29,244 | 29,244 | — | 29,244 |
Estimate of Mr. Laderman's Potential Post-Employment Payments and Benefits as of December 31, 2015 | |||||||||||||||||||
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Type of Payment or Benefit | Retirement ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 1,575,000 | — | 1,575,000 | |||||||||||||
Long-Term Incentives | |||||||||||||||||||
LTRP Award (2014) | 222,222 | 222,222 | 222,222 | (1) | — | 222,222 | |||||||||||||
Pre-tax Margin PB RSUs (2015) | 90,840 | 90,840 | 90,840 | (1) | 90,840 | ||||||||||||||
ROIC PB RSUs (2014 and 2015) | 844,716 | 422,358 | 422,358 | (1) | — | 422,358 | |||||||||||||
Restricted Shares (2013, 2014 and 2015) | — | 826,323 | 826,323 | — | — | 826,323 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | 263,176 | 175,273 | 263,176 | 263,176 | — | 263,176 | |||||||||||||
Life Insurance | 3,686 | — | 3,686 | 3,686 | — | 3,686 | |||||||||||||
Perquisites and Tax Payments | |||||||||||||||||||
Outplacement Services | — | — | — | 15,300 | — | 15,300 | |||||||||||||
Flight Benefits | 29,627 | 29,627 | 29,627 | 29,627 | — | 29,627 | |||||||||||||
Tax Indemnification on Flight Benefits | 256,479 | 256,479 | 256,479 | 256,479 | — | 256,479 |
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Estimate of Mr. G. Hart's Potential Post-Employment Payments and Benefits as of December 31, 2019 | ||||||||||||
| | | | | | | | | | | | |
Type of Payment or Benefit | Retirement ($)(1) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($)(2) | Change In Control With Qualifying Termination ($) | ||||||
Cash Severance | 0 | 0 | 0 | 3,502,000 | 0 | 3,502,000 | ||||||
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Long-Term Incentives | ||||||||||||
Time-vested RSUs (2017, 2018 and 2019) | 1,558,929 | 3,117,505 | 3,117,505 | (1) | 0 | 3,117,505 | ||||||
Performance-Based RSUs (2018) | 2,245,238 | 1,122,619 | 1,122,619 | (1) | 0 | 1,122,619 | ||||||
Performance-Based RSUs (2019) | 997,238 | 498,619 | 498,619 | (1) | 0 | 498,619 | ||||||
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Continuation Coverage Benefits | ||||||||||||
Health and Welfare | 0 | 0 | 0 | 77,377 | 0 | 77,377 | ||||||
Life Insurance | 0 | 0 | 0 | 1,236 | 0 | 1,236 | ||||||
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Perquisites | ||||||||||||
Outplacement Services | 0 | 0 | 0 | 25,000 | 0 | 25,000 | ||||||
Flight Benefits | 121,280 | 0 | 121,280 | 121,280 | 0 | 121,280 | ||||||
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Estimate of Mr. B. Hart's Potential Post-Employment Payments and Benefits as of December 31, 2019 | ||||||||||||
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Type of Payment or Benefit | Resignation without Good Reason ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($)(1) | Change In Control With Qualifying Termination ($) | ||||||
Cash Severance | 0 | 0 | 0 | 3,193,000 | 0 | 3,193,000 | ||||||
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Long-Term Incentives | ||||||||||||
Time-vested RSUs (2017, 2018 and 2019) | 0 | 2,843,985 | 2,843,985 | 0 | 0 | 2,843,985 | ||||||
Performance-Based RSUs (2018) | 0 | 1,023,547 | 1,023,547 | 0 | 0 | 1,023,547 | ||||||
Performance-Based RSUs (2019) | 0 | 454,633 | 454,633 | 0 | 0 | 454,633 | ||||||
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2017 Special Award—Time vested RSUs | 0 | 851,830 | 851,830 | 0 | 0 | 851,830 | ||||||
2017 Special Award—Stock Options | 0 | 226,616 | 226,616 | 0 | 0 | 226,616 | ||||||
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Continuation Coverage Benefits | ||||||||||||
Health and Welfare | 0 | 0 | 0 | 82,884 | 0 | 82,884 | ||||||
Life Insurance | 0 | 0 | 0 | 1,236 | 0 | 1,236 | ||||||
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Perquisites | ||||||||||||
Outplacement Services | 0 | 0 | 0 | 25,000 | 0 | 25,000 | ||||||
Flight Benefits | 69,212 | 0 | 69,212 | 69,212 | 0 | 69,212 | ||||||
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Estimate of Mr. Laderman's Potential Post-Employment Payments and Benefits as of December 31, 2019 | ||||||||||||
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Type of Payment or Benefit | Retirement ($)(1) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($)(2) | Change In Control With Qualifying Termination ($) | ||||||
Cash Severance | 0 | 0 | 0 | 2,987,000 | 0 | 2,987,000 | ||||||
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Long-Term Incentives | ||||||||||||
Time-vested RSUs (2017, 2018 and 2019) | 918,250 | 2,060,866 | 2,060,866 | (1) | 0 | 2,060,866 | ||||||
Performance-Based RSUs (2018) | 1,168,073 | 584,037 | 584,037 | (1) | 0 | 584,037 | ||||||
Performance-Based RSUs (2019) | 850,597 | 425,299 | 425,299 | (1) | 0 | 425,299 | ||||||
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Continuation Coverage Benefits | ||||||||||||
Health and Welfare | 103,483 | 66,730 | 103,483 | 103,483 | 0 | 103,483 | ||||||
Life Insurance | 1,621 | 0 | 1,621 | 1,621 | 0 | 1,621 | ||||||
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Perquisites | ||||||||||||
Outplacement Services | 0 | 0 | 0 | 25,000 | 0 | 25,000 | ||||||
Flight Benefits | 89,642 | 0 | 89,642 | 89,642 | 0 | 89,642 | ||||||
Tax Indemnification on Flight Benefits | 297,092 | 0 | 297,092 | 297,092 | 0 | 297,092 | ||||||
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Estimate of Mr. Compton's Potential Post-Employment Payments and Benefits as of December 31, 2015 | |||||||||||||||||||
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Type of Payment or Benefit | Retirement ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 4,112,500 | — | 4,112,500 | |||||||||||||
Long-Term Incentives | |||||||||||||||||||
LTRP Award (2014) | 490,000 | 490,000 | 490,000 | (1) | — | 490,000 | |||||||||||||
Pre-tax Margin PB RSU (2015) | 211,437 | 211,437 | 211,437 | (1) | — | 211,437 | |||||||||||||
ROIC PB RSUs (2014 and 2015) | 1,885,972 | 942,986 | 942,986 | (1) | — | 942,986 | |||||||||||||
Restricted Shares (2013, 2014 and 2015) | — | 1,856,922 | 1,856,922 | — | — | 1,856,922 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | — | — | — | 78,305 | — | 78,305 | |||||||||||||
Life Insurance | — | — | — | 1,231 | — | 1,231 | |||||||||||||
Perquisites and Tax Payments | |||||||||||||||||||
Outplacement Services | — | — | — | 25,000 | — | 25,000 | |||||||||||||
Flight Benefits | 55,154 | 55,154 | 55,154 | 55,154 | — | 55,154 | |||||||||||||
Tax Indemnification on Flight Benefits | 298,154 | 298,154 | 298,154 | 298,154 | — | 298,154 | |||||||||||||
Automobile | 50,521 | 50,521 | 50,521 | 50,521 | — | 50,521 |
Estimate of Mr. G. Hart's Potential Post-Employment Payments and Benefits as of December 31, 2015 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Type of Payment or Benefit | Resignation without Good Reason ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 3,995,000 | — | 3,995,000 | |||||||||||||
Long-Term Incentives | |||||||||||||||||||
LTRP Award (2014) | — | 333,333 | 333,333 | — | — | 333,333 | |||||||||||||
Pre-tax Margin PB RSU (2015) | — | 166,017 | 166,017 | — | — | 166,017 | |||||||||||||
ROIC PB RSUs (2014 and 2015) | — | 664,776 | 664,776 | — | — | 664,776 | |||||||||||||
Restricted Shares (2013, 2014 and 2015) | — | 1,134,082 | 1,134,082 | — | — | 1,134,082 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | — | — | — | 78,328 | — | 78,328 | |||||||||||||
Life Insurance | — | — | — | 1,232 | — | 1,232 | |||||||||||||
Perquisites | |||||||||||||||||||
Outplacement Services | — | — | — | 25,000 | — | 25,000 | |||||||||||||
Flight Benefits | 33,953 | 33,953 | 33,953 | 33,953 | — | 33,953 |
Estimate of Mr. Bonds' Potential Post-Employment Payments and Benefits as of December 31, 2015 | |||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Type of Payment or Benefit | Retirement ($) | Death ($) | Disability ($) | Involuntary Termination without Cause or Voluntary Termination for Good Reason ($) | Change In Control ($) | Change In Control With Qualifying Event ($) | |||||||||||||
Cash Severance | — | — | — | 3,055,000 | — | 3,055,000 | |||||||||||||
Long-Term Incentives | |||||||||||||||||||
LTRP Award (2014) | 281,667 | 281,667 | 281,667 | (1) | — | 281,667 | |||||||||||||
Pre-tax Margin PB RSUs (2015) | 123,405 | 123,405 | 123,405 | (1) | — | 123,405 | |||||||||||||
ROIC PB RSUs (2014 and 2015) | 1,088,088 | 544,044 | 544,044 | (1) | — | 544,044 | |||||||||||||
Restricted Shares (2013, 2014 and 2015) | — | 1,073,401 | 1,073,401 | — | — | 1,073,401 | |||||||||||||
Continuation Coverage Benefits | |||||||||||||||||||
Health and welfare | — | — | — | 53,801 | — | 53,801 | |||||||||||||
Life Insurance | — | — | — | 1,231 | — | 1,231 | |||||||||||||
Perquisites and Tax Payments | |||||||||||||||||||
Outplacement Services | — | — | — | 25,000 | — | 25,000 | |||||||||||||
Flight Benefits | 88,594 | 88,594 | 88,594 | 88,594 | — | 88,594 | |||||||||||||
Tax Indemnification on Flight Benefits | 326,864 | 326,864 | 326,864 | 326,864 | — | 326,864 |
Departure of Messrs. Smisek and Rainey
Separation Agreement with Mr. Smisek. Mr. Smisek stepped down from his roles as Chairman, President and CEO effective September 8, 2015 (the "Separation Date"). Mr. Smisek and the Company (together with United Airlines) entered into a Separation Agreement and General Release (the "Separation Agreement") dated as of the Separation Date in connection with Mr. Smisek's resignation from the Company and the Board. The payments and benefits under the Separation Agreement are substantially consistent with an involuntary termination without cause under Mr. Smisek's employment agreement and based on his retirement eligibility. The Separation Agreement specified, among other things, the following:
Accrued Obligations and Vested Benefits. Mr. Smisek retained all obligations and benefits that accrued or vested prior to the Separation Date, including salary through his separation date, reimbursement of business expenses and payment for earned but unused vacation days. Mr. Smisek also retained his right to payments under plans in which Mr. Smisek was vested as of the Separation Date. The value of Mr. Smisek's frozen SERP benefits are set forth in the 2015 Pension Benefits Table and the benefits are described under "—Narrative to Pension Benefits Table."
Separation Payment. Mr. Smisek received a separation payment in the amount of $4,875,000, payable as a lump sum in cash. This payment is included in the All Other Compensation column of the 2015 Summary Compensation Table and is subject to a clawback in certain circumstances as described below.
Annual Incentive Award. Mr. Smisek received pro-rated payment of his 2015 Annual Incentive Plan award. This payment is included in the Non-equity Incentive Plan Compensation column of the
2015 Summary Compensation Table and is subject to clawback in certain circumstances as described below.
Relative Pre-tax Margin and ROIC Performance Awards. Mr. Smisek is eligible for pro-rated cash payments (based on the number of days elapsed in the applicable performance period prior to the Separation Date) under the outstanding 2013, 2014 and 2015 relative pre-tax margin based LTRP cash and PB RSU awards and 2013, 2014 and 2015 ROIC PB RSU awards, based on the Company's achievement of the specified performance goals. This treatment is consistent with the payments provided in connection with Mr. Smisek's retirement eligibility under the awards. Estimates of the potential pro-rated payment opportunities under his 2014 and 2015 awards (both LTRP cash and PB RSU) are set forth in the table below. Consistent with the above separation scenarios for the remaining named executive officers, the 2014 and 2015 relative pre-tax margin based LTRP cash and PB RSU awards are estimated based on the target level and the 2014 and 2015 ROIC based PB RSU awards are estimated based on the stretch performance level. The 2013 pre-tax margin based LTRP award for the January 1, 2013 through December 31, 2015 performance period did not achieve the entry level of performance and therefore no amounts were paid with respect to this award. The 2013 ROIC based PB RSU award was achieved at the stretch performance level and the pro-rated award was paid in 2016 following certification of the performance conditions. The payment of the 2013 ROIC based PB RSU award is included below and in the "Option Exercises and Stock Vested for 2015" table above.
Restricted Share Awards. Based on pro-rata service under outstanding restricted share awards for fiscal years 2013, 2014 and 2015, the Company vested and delivered to Mr. Smisek a total of 60,746 shares of Common Stock. The value of these shares as of the date of release is included below and in the "Option Exercises and Stock Vested for 2015" table. These awards are subject to clawback in certain circumstances as described below.
Continued Benefits. Mr. Smisek and his eligible dependents receive continued coverage under the Company's welfare benefit plans until he becomes eligible for Medicare coverage under applicable law (but in no event beyond age 65), plus tax indemnification payments on any income imputed to him from such coverage. Mr. Smisek also receives flight benefits (plus tax indemnification payments on such flight benefits) and parking privileges at the Company's hub airports in Houston, Texas and Chicago, Illinois for the remainder of his lifetime. The Company also transferred title to Mr. Smisek of the automobile used by him at the Separation Date. Mr. Smisek previously had paid a portion of the purchase price of such vehicle. The automobile benefit also is included in the All Other Compensation column of the 2015 Summary Compensation Table.
Other Terms and Conditions. Under the terms of the Separation Agreement, Mr. Smisek released and discharged the Company and certain related parties from any and all claims based on any events or circumstances arising or occurring prior to and including the date of the Separation Agreement to the fullest extent permitted by law, subject to certain limited exceptions. He also agreed to hold in strict confidence any confidential information related to the Company and its affiliates. He remains subject to two-year post-employment covenants not to compete and not to solicit employees or business partners of the Company and its affiliates. Mr. Smisek also agreed to a non-disparagement covenant and to cooperate fully with the Company and its affiliates in the defense, prosecution or conduct of any claims or investigations relating to events or occurrences that transpired while Mr. Smisek was employed by the Company. Pursuant to the Separation Agreement, the Company may terminate and require repayment (or "clawback") of certain severance payments and benefits (as noted in the table below) if (i) the Company determines that Mr. Smisek failed to comply with the cooperation provisions of the Separation Agreement and failed to remedy any such failure within five days of receipt of written notice from the Company or (ii) Mr. Smisek is convicted or pleads guilty ornolo contendere to any felony or any crime involving moral turpitude which conviction or plea relates to or arises from Mr. Smisek's service with the Company and its affiliates.
A summary of the estimated payments and benefits to Mr. Smisek pursuant to the Separation Agreement is set forth below.
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Resignation of Mr. Rainey. Mr. Rainey resigned as Executive Vice President and Chief Financial Officer effective July 30, 2015. In connection with his departure, Mr. Rainey is entitled to the benefits under the Executive Severance Plan applicable to a resignation without "good reason," and the only such benefit is the lifetime flight benefit ($78,526 estimated incremental cost to the Company). All of Mr. Rainey's incentive awards were forfeited in connection with his resignation and he did not receive any continuation coverage benefits. Mr. Rainey remains subject to confidentiality obligations indefinitely and is subject to non-competition and non-solicitation obligations pursuant to surviving obligations of his prior employment agreement and the terms of the 2014 and 2015 restricted share awards.
Methodologies and Assumptions used for Calculating Other Potential Post-Employment Payments
For purposes of quantifying the payments and estimated benefits disclosed in the foregoing tables, the Company utilized the following assumptions and methodologies to calculate the applicable costs to the Company:
value of the continued life insurance benefits was determined based on individualcalculated using the January 2020 term life insurance premium rates paid bycost to the Company for each executive.
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78 | | | | 2020 Proxy Statement | | |
providing travel benefits for each year is the same as the actual incremental cost incurred by the Company for providing travel benefits to the executive and eligible family members and significant others for 2015. On the basis of2019. Based on these assumptions, the Company determined the value of lifetime travel benefits by calculating the present value of the assumed incremental cost of providing the benefit to the executive and the executive's eligible family members over a 20-year period using a discount rate of 4.36%3.35%. The tax indemnification on lifetime flight benefits was determined utilizing the same three assumptions stated above. Using these assumptions, the Company determined the value of the indemnification by calculating the present value of the executive's future assumed annual tax indemnification (equal to the executive's actual 20152019 tax indemnity) over a 20-year period using a discount rate of 4.36%3.35%.
2019 CEO Pay Ratio |
As required by Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 402(u) of Regulation S-K, we are providing information about the relationship of the annual total compensation of our employees and the annual total compensation of our CEO, Oscar Munoz. The CEO pay ratio included below is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K. In complying with the CEO pay ratio disclosure requirements, companies are permitted to use a variety of assumptions and methodologies. As a result, the CEO pay ratio reported by other companies may not be comparable with the ratio reported below since all results are impacted by the nature of each company's compensation reward structure and employee demographics and the chosen assumptions and methodologies permitted under the SEC rules.
Ratio. For the fiscal year that ended December 31, 2019, the estimated median annual total compensation of all employees of the Company (including our consolidated subsidiaries, but excluding our CEO) was $74,750 and the 2019 annual total compensation of our CEO was $12,643,005. Based on the foregoing, the 2019 ratio of the annual total compensation of our CEO to the median of the annual total compensation of all employees is estimated to be 169 to 1.
Identifying the Median Employee and Calculating Total Compensation. Since December 1, 2018 (the date used to select the 2018 median employee), there have not been any changes in the Company's employee population or employee compensation arrangements that we believe would significantly impact the pay ratio disclosure. However, there were significant changes in the circumstances related to calculation of 2019 annual compensation for the median employee originally identified in 2018 that would result in a significant change in our pay ratio disclosure if the 2019 compensation of such employee was utilized to calculate our 2019 CEO pay ratio. Therefore, as permitted under the CEO pay ratio disclosure rules, we are using a previously identified alternate median employee to calculate the 2019 CEO pay ratio. The alternate median employee was identified in the process described below with respect to the original median employee, and the alternate employee's 2018 compensation was substantially similar to the original median employee based on the compensation measure used to select the original median employee.
For purposes of identifying the median employee as of December 31, 2018, based on our internal payroll records, we determined that there were approximately 91,700 employees of the Company (including our consolidated subsidiaries), of which approximately 4,100 were located outside of the United States. Pursuant to thede minimis exemption provided under Item 402(u) of Regulation S-K, because our non-U.S. employees account for less than 5% of our total U.S. and non-U.S. employees, all our international employees have been excluded. Our Guam employees are included with our U.S. employees for purposes of these calculations.
As of December 31, 2018, our international employee locations and the number of excluded employees in each location were as follows: Antigua and Barbuda—1; Argentina—147; Aruba—1; Australia—49; Bahamas—2; Belgium—45; Belize—17; Brazil—322; Canada—19; Cayman Islands—1; Chile—14; China—161; Colombia—57; Costa Rica—90; Denmark—2; Dominican Republic—32; Ecuador—33; El Salvador—45;
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| | 2020 Proxy Statement | | | | 79 |
France—85; French Polynesia—1; Germany—136; Guatemala—44; Honduras—41; Hong Kong—144; India—147; Ireland—19; Israel—32; Italy—15; Jamaica—1; Japan—514; Marshall Islands—34; Mexico—771; Micronesia (Federated States)—130; Netherlands—51; New Zealand—5; Nicaragua—25; Norway—1; Panama—55; Peru—46; Philippines—9; Portugal—23; Singapore—58; Saint Maarten—1; South Korea—2; Spain—30; Sweden—2; Switzerland—15; Taiwan—68; Trinidad/Tobago—5; Turks and Caicos Islands—1; and United Kingdom—529. After taking into account thede minimis exemption, 87,659 employees in the U.S. and no employees located outside of the U.S. were considered for identifying the median employee.
For purposes of identifying the median employee, we utilized the dollar amount reported in Box 5 of the 2018 Form W-2 Wage and Tax Statement provided for each U.S. employee on the Company's payroll as of December 31, 2018. This consistently applied compensation measure was chosen because it is a readily available measure for all U.S. employees and we believe it is a reasonable measure of total annual compensation.
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2019 Director Compensation |
The following table represents the amount of director compensation in 20152019 for each director who served during that year other than Messrs.Mr. Munoz. The 2019 compensation for Mr. Munoz and Smisek. All 2015 compensation of each of Messrs. Munoz and Smisek is shown in the 20152019 Summary Compensation Table, including compensation that Mr. Munoz received for his service as a non-employee director of the Board for the period January 1, 2015 through September 7, 2015. During the period in which he served as the Company's Chairman, President and Chief Executive Officer in 2015, Mr. Smisek received no additional compensation for his service as a director. Each of Messrs. Harford, Insler, Kennedy, Milton, Pantoja, Shapiro and Whitehurst joined the Board in 2016 and did not receive any director compensation during 2015.Table. For purposes of the disclosure contained in this section, we refer to the non-employee directors elected by the holders of our Common Stock as "non-employee directors."
Name | Fees Earned or Paid in Cash ($) | Stock Awards ($)(1) | All Other Compensation ($)(2) | Total ($) | |||||||||
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Current Directors who Served as Directors in 2015 | |||||||||||||
Carolyn Corvi | 165,118 | 124,493 | 3,677 | 293,288 | |||||||||
Jane C. Garvey | 130,000 | 124,493 | 16,855 | 271,348 | |||||||||
Walter Isaacson | 142,500 | 124,493 | 15,892 | 282,885 | |||||||||
Henry L. Meyer III | 238,343 | 159,751 | 37,322 | 435,416 | |||||||||
William R. Nuti | 123,750 | 124,493 | 4,428 | 252,671 | |||||||||
Laurence E. Simmons | 145,000 | 124,493 | 57,770 | 327,263 | |||||||||
David J. Vitale | 193,283 | 124,493 | 29,536 | 347,312 | |||||||||
John H. Walker | 192,500 | 124,493 | 20,893 | 337,886 | |||||||||
Charles A. Yamarone | 131,250 | 124,493 | 11,623 | 267,366 | |||||||||
Former Directors who Served as Directors in 2015(3) | |||||||||||||
Richard A. Delaney | — | — | 12,857 | 12,857 | |||||||||
James J. Heppner | — | — | 35,379 | 35,379 |
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Name | Fees Earned or Paid in Cash ($)(1) | Stock Awards ($)(2)(3) | All Other Compensation ($)(4) | Total ($) | |||||
Carolyn Corvi | 147,500 | 170,112 | 11,760 | 329,372 | |||||
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Jane C. Garvey | 225,000 | 290,224 | 17,708 | 532,932 | |||||
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Barney Harford | 138,510 | 170,112 | 63,553 | 372,175 | |||||
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Michele J. Hooper | 140,000 | 170,154 | 30,635 | 340,789 | |||||
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Todd M. Insler | — | (5) | — | (5) | 32,254 | 32,254 | |||
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Walter Isaacson | 145,000 | 170,154 | 18,199 | 333,353 | |||||
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James A. C. Kennedy | 145,000 | 170,112 | 51,317 | 366,429 | |||||
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Sito J. Pantoja | — | (5) | — | (5) | 38,925 | 38,925 | |||
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Edward M. Philip | 147,500 | 170,154 | 21,011 | 338,665 | |||||
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Edward L. Shapiro | 137,500 | 170,154 | 61,434 | 369,088 | |||||
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David J. Vitale | 150,000 | 170,112 | 30,636 | 350,748 | |||||
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James M. Whitehurst | 137,500 | 170,154 | 49,998 | 357,652 | |||||
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Former Director who served as a Director in 2019 | |||||||||
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William R. Nuti | 53,639 | — | 14,354 | 67,993 | |||||
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For Mr. Meyer,Ms. Garvey, the amount shown also includes the grant date fair value of 579.421,484 restricted share units granted on September 17, 2015 in connection with hisMay 23, 2019 for her service as Non-Executive Chairman.
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multiplying the number of cash-settled units by the average of the high and low trading prices per share of Common Stock on the date of grant ($52.9380.87 per share on June 11, 2015 and $60.15 per share on September 17, 2015)May 23, 2019). With respect to the share-settled portion of the restricted share unit award, that is treated as an equity award (share-settled), the grant date fair value was calculated by multiplying the number of share-settled units by the closing price per share of Common Stock on the date of grant ($52.5080.91 per share on June 11, 2015 and $61.56 per share on September 17, 2015)May 23, 2019).
We do not payOur directors who are employees of the Company or directors who are directors elected by a class of stock other than Common Stock additionaldo not receive any cash or equity compensation forfrom the Company related to their servicesservice as directors. However, each of the ALPA director and the IAM director are entitled to receive certain flighttravel benefits. See "—Travel Benefits" below.
The Nominating/Governance Committee periodically reviews and makes recommendations to the Board regarding the form and amount of compensation of the Company's non-employee directors. The Nominating/Governance Committee has not delegated any authority with respect to director compensation matters, and no executive officer plays a role in determining the amount of director compensation. The Compensation Committee's independent compensation consultant, Exequity, has advised the Nominating/Governance Committee with respect to director compensation matters. These matters include, among other things, a review and market analysis of board of director pay and benefits and share ownership guidelines.
The Company's non-employee director compensation program was designed with reference to median director pay levels among the companies that comprise the Company's benchmarking peer group. See "Executive Compensation—Compensation Discussion and Analysis—Compensation Process and Oversight—Benchmarking" for a listing of the companies included in this group. In connection with such review the annual cash retainer fee for non-employee directors increased from $85,000 to $100,000 and the equity retainer increased from $160,000 to $170,000, effective in 2019. The compensation for the non-employee directors, including compensation for the Non-Executive Chairman, was approved by the independent members of the Special Committee of the Board, and the members of the Subcommittee of such Special Committee were approved by the Board upon recommendation of the Nominating/Governance Committee. Exequity provided the Nominating/Governance Committee with advice and information regarding market practices in connection with establishing these compensation levels.
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Cash Retainers for Board and Committee Service |
Effective January 1, 2015 (except as noted below), in connection with a review by Exequity ofIn 2019, the Company's non-employee director compensation program, the Board approveddirectors received the following cash retainers for Board and committee service:
Committees and an additional annual retainer of $15,000 for each of the members (other than the Chairperson) of the Audit Committee.
In addition, effective March 2015,recognition of the Board approved an additional monthly cash retainerimpact of $2,000COVID-19 on United's business and to lead by example, the Company's non-employee directors who serve onwaived 100% of their cash compensation for the Special Committee (but do not serve on the Subcommittee)second and an additional monthly cash retainerthird quarters of $6,000 to the non-employee directors who serve on both the Special Committee and the Subcommittee of the Special Committee.2020.
Equity Compensation |
To attract and retain the services of experienced and knowledgeable non-employee directors, the Company adopted the 2006 Director Equity Incentive Plan, as amended and restated on February 20, 2014 (the"DEIP"(the "DEIP"). Under the DEIP, non-employee directors may receive as compensation periodic awards, stock compensation and/or cash compensation. Periodic awards are equity-based awards, including options, restricted stock, SARsstock appreciation rights and/or shares, that are granted to non-employee directors from time to time at the discretion of the Board.
The Board has approvedNon-employee directors currently receive an annual equity compensation under the DEIPaward valued at $125,000$170,000, which is made in connection with the non-employee directors' election to the Board at the annual stockholder meeting. The equity award size is calculated based on the average of the high and low sales prices of Common Stock on the date of grant. Such awards are granted in connection with the non-employee directors' election to the Board at theThe Non-Executive Chairman receives an additional annual stockholder meeting. For the year ended December 31, 2015, non-employee directors received an annual grant of share units on June 11, 2015, with a grant date fair value equal to $124,493. In addition, in connection with his roleequity award, as non-executive chairman, Mr. Meyer received a pro-rated share unit award with respect to the non-executive chairman compensation described above.below. In each case, each share unit represents the economic equivalent of one share of Common Stock and vests on the one-year anniversary of the date of grant. Upon settlement, the share units willare designed to be settled: (i) 50% in cash based on the average of the high and low salestrading prices per share of Common Stock on the one-year anniversary date and (ii) 50% in shares of Common Stock. Any odd or fractional units will beare settled in cash. Pursuant to the terms of the DEIP, a director may elect to receive the cash-settled portion of the award in shares and pursuant to any applicable deferral election, the award is deferred into a share unit account under the DEIP.
Non-Executive Chairman Compensation |
In addition to the cash and equity compensation described above, the independent members of the Board has approved additional compensation for the Non-Executive Chairman of $200,000 annually, of which: (i) $80,000 is paid in four equal quarterly installments and (ii) $120,000 is granted in share units under the DEIP. This compensation has been in effect since 2015 and remained unchanged for 2019.
As discussed elsewhere in this proxy statement, Ms. Garvey is retiring from the Board at the end of her current term. Following the Annual Meeting, Mr. Munoz has been selected to succeed Ms. Garvey as Executive Chairman of the Board and Mr. Philip has been chosen by the independent members of the Board
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to serve as Lead Director. Compensation for the role of Lead Director has not yet been established by the Nominating/Governance Committee.
Director Compensation Deferral under the DEIP |
Under the DEIP, non-employee directors may defer the receipt of some or all of their cash compensation through credits to a share account established under the terms of the DEIP. Non-employee directors may also defer the receipt of shares that would otherwise be issued under an equity compensation award through credits to his or her share account. Unless otherwise specified by the director at the time of the deferral election, distribution from the share account will be made within 60 days following the date on which the non-employee director terminates his or her position as a director of the Company. Some of our directors also have deferrals in place with respect to compensation that was earned prior to the 2010 merger and these amounts have different distribution terms.
Stock Ownership Guidelines |
The stock ownership guidelines that apply to our non-employee directors encourage our non-employee directors to hold shares of Common Stock or equity-based awards (including share units and restricted shares)share units) with a fair market value equal to or exceeding fourfive times the annual cash retainer paid to the non-employee directors, which is currently set at $85,000.directors. The guidelines provide for a transition period of five years for non-employee directors to achieve the ownership requirement. The Nominating/Governance Committee reviews equity ownership of the non-employee directors annually. Once a non-employee director is determined to be in compliance with the stock ownership guidelines, the non-employee director will be considered to be in compliance until such time as he or she sells or otherwise disposes of any of his or her Common Stock, at which time the Nominating/Governance Committee will re-evaluate the non-employee director's compliance with the stock ownership guidelines. Messrs. Harford, Kennedy, Milton, Shapiro and WhitehurstWith the exception of Ms. Hooper, who joined the Board in 20162018 and will have a transition period of five years to achieve compliance with the sharestock ownership guidelines. All otherguidelines, all of the non-employee directors are currentlywere in compliance with the guidelines.guidelines as of the last measurement date.
Non-Executive Chairman/Lead Director Compensation
In addition to the cash and equity compensation described above, the Board approved an annual retainer for the Lead Director of $25,000, which was effective January 1, 2015 through September 16, 2015. On September 17, 2015, in connection with naming Mr. Munoz as President and Chief Executive Officer and Mr. Meyer as the Non-Executive Chairman of the Board on September 8, 2015, the Board considered and approved additional compensation for the Non-Executive Chairman of $200,000 annually, of which: (i) $80,000 is paid in four equal quarterly installments and (ii) $120,000 is granted in share units under the DEIP. For 2015, the supplemental Non-Executive Chairman compensation was
We consider it important for our directors to understand our business and to have exposure to our operations and employees. For that reason, our directors receive flight benefits, including a travel card permitting positive space travel by the director, the director's spouse or qualified domestic partner and certain other eligible travelers, frequent flyer cards, and access to our United Club facilities. These benefits are taxable to the director, subject to the reimbursement of certain of such taxes by the Company. Prior to the Merger, United Air Lines2010 merger, the Company and Continental adopted policies to eliminate tax indemnification for post-separation perquisites provided to non-employee directors who did not have an existing right to such benefits as of the date the respective policy was adopted. The tax indemnification provided to the non-employee directors is subject to an annual limit. A non-employee director who retires from the Board with at least five consecutive years of service as a director will receive lifetime travel benefits, subject to certain exceptions. In addition, Mr. Pantoja will receive lifetime travel benefits if he meets the required five years of consecutive service on the Board.
Charitable Contributions |
We adopted a program in 2009 through which theThe Company provides a matching charitable contribution to qualifying nonprofit organizations to which a director makes a personal commitment in an aggregate amount of up to $20,000 per year. In the case of each of the ALPA director and the IAM director, the Company will provide a matching charitable contribution to qualifying nonprofit organizations to which the director or the director's union contributescontributions of up to $20,000 per year in the aggregate.aggregate to qualifying nonprofit organizations to which either the director or the director's union contributes. During 2015, directors elected2019, the Company also donated complimentary positive space air travel to qualified charitable organizations selected by the holders of Common Stocknon-employee directors. In 2019, such directors were also entitledpermitted to donate tenup to four round trip tickets for complimentary positive space travel to charity.qualified charitable organizations.
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Audit Committee Report |
United ContinentalAirlines Holdings, Inc. Audit Committee Report
To the Board of United ContinentalAirlines Holdings, Inc.:
The Audit Committee is comprised of fivefour non-employee members of the Board. After reviewing the qualifications of the current members of the Audit Committee, and any relationships they may have with the Company that might affect their independence from the Company, the Board has determined that: (1) all current Audit Committee members are "independent" as that concept is defined in Section 10A of the Exchange Act; (2) all current Audit Committee members are "independent" as that concept is defined in the applicable NYSE listing standards;Nasdaq Listing Rules; (3) all current Audit Committee members are financially literate under the applicable NYSE listing standards;Nasdaq Listing Rules; and (4) each of Ms. Hooper, Mr. Vitale, Mr. WalkerPhilip and Mr. YamaroneVitale qualifies as an audit committee financial expert under the applicable rules promulgated pursuant to the Exchange Act.
The Board appointed the undersigned directors as members of the Audit Committee and adopted a written charter setting forth the procedures and responsibilities of the Audit Committee. Each year, the Audit Committee reviews the adequacy of the charter and recommends any changes to the Board for approval. In addition, the Company will furnish an annual written affirmation to the NYSE relating to, among other things, clauses (2)-(4) of the first paragraph of this report and the adequacy of the committee charter.
During the last year, and earlier this year in preparation for the filing with the SEC of the 20152019 Form 10-K, the Audit Committee, among other matters:
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Notwithstanding the foregoing actions and the responsibilities set forth in the committeeAudit Committee charter, the charter clarifies that the Audit Committee is not responsible for certifying the Company's financial statements or guaranteeing the independent auditors' report. The functions of the Audit Committee are not intended to duplicate or substitute for the activities of management and the independent auditors, and the Audit Committee members cannot provide any expert or special assurance as to the Company's financial statements or internal controls or any professional certifications as to the work of the independent auditors. Management is responsible for the Company's financial reporting process, including its system of internal control over financial reporting, and for the preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States. The independent auditors are responsible for expressing an opinion on those financial statements. Audit Committee members are not employees of the Company and are not acting as professional accountants or auditors on behalf of the Company. Therefore, the Audit Committee has relied, without independent verification, on management's representation that the financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted
in the United States and on the representations of the independent auditors included in their report on the Company's financial statements.
The Audit Committee meets periodically with management and the independent and internal auditors, including private discussions with the independent auditors and the Company's internal auditors, and receives the communications described above. The Audit Committee has also established procedures for: (1) the receipt, retention and treatment of complaints received by the Company regarding accounting, auditing or internal accounting control matters and (2) the confidential, anonymous submission by the Company's employees of concerns regarding questionable accounting or auditing matters. However, this oversight does not provide the Audit Committee with an independent basis to determine that management has maintained: (1) appropriate accounting and financial reporting principles or policies or (2) appropriate internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. Furthermore, the Audit Committee's considerations and discussions with management and the independent auditors do not assure that the Company's financial statements are presented in accordance with accounting principles generally accepted in the United States or that the audit of the Company's financial statements has been carried out in accordance with auditing standards generally accepted in the United States.
The information contained in this report shall not be deemed to be "soliciting material" or to be "filed" with the SEC, nor shall such information be incorporated by reference into any future filings with the SEC, or subject to the liabilities of Section 18 of the Exchange Act, except to the extent that the Company specifically incorporates it by reference into a document filed under the Securities Act of 1933, as amended, or the Exchange Act.
Respectfully submitted, | ||
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Proposal No. 2: Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2020 |
RATIFICATION OF APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR FISCAL YEAR 2016
Ernst & Young LLP was the Company's independent registered public accounting firm for the fiscal year ended December 31, 2015.2019. The Audit Committee has approved the appointment of Ernst & Young LLP to serve as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2016.2020.
Audit Committee Pre-Approval Policy and Procedures |
The Audit Committee has adopted a policy on pre-approval of services of the Company's independent registered public accounting firm. The policy provides that the Audit Committee shall pre-approve all audit and non-audit services to be provided to the Company and its subsidiaries and affiliates by its independent auditors. The process by which this is carried out is as follows:
For recurring services, the Audit Committee reviews and pre-approves the independent registered public accounting firm's annual audit services in conjunction with the annual appointment of the outside auditors. The reviewed materials include a description of the services along with related fees. The Audit Committee also reviews and pre-approves other classes of recurring services along with fee thresholds for pre-approved services. In the event that the additional services are required prior to the next scheduled Audit Committee meeting, pre-approvals of additional services follow the process described below.
Any requests for audit, audit-related, tax and other services not contemplated with the recurring services approval described above must be submitted to the Audit Committee for specific pre-approval and cannot commence until such approval has been granted. Normally, pre-approval is provided at regularly scheduled meetings. However, the authority to grant specific pre-approval between meetings, as necessary, has been delegated to the Chair of the Audit Committee. The Chair must update the Audit Committee at the next regularly scheduled meeting of any services that were granted specific pre-approval.
On a periodic basis, the Audit Committee reviews the status of services and fees incurred year to dateyear-to-date and a list of newly pre-approved services since its last regularly scheduled meeting. The Audit Committee has considered whether the 20152019 and 20142018 non-audit services provided by Ernst & Young LLP are compatible with maintaining auditor independence and concluded that such services were compatible with maintaining Ernst & Young LLP's independence.
All of the services in 20152019 and 20142018 under the Audit Fees, Audit-Related Fees, Tax Fees and All Other Fees categories below have been approved by the Audit Committee pursuant to paragraph (c)(7) of Rule 2-01 of Regulation S-X of the Exchange Act.
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Independent Registered Public Accounting Firm Fees |
The aggregate fees billed for professional services rendered by the Company's independent auditors in 20152019 and 20142018 are as follows (in thousands):
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Service | 2015 | 2014 | 2019 | 2018 | |||||||
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Audit Fees | $ | 4,193 | $ | 3,827 | $4,323 | $3,992 | |||||
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Audit-Related Fees | 98 | 181 | 403 | 375 | |||||||
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Tax Fees | 2,050 | 560 | 174 | 166 | |||||||
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All Other Fees | 5 | 5 | — | 2 | |||||||
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Total | $ | 6,346 | $ | 4,573 | $4,900 | $4,535 | |||||
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Audit Fees
For 20152019 and 2014,2018, audit fees consist primarily of the audit and quarterly reviews of the consolidated financial statements and the audit of the effectiveness of internal control over financial reporting of the Company and its wholly-owned subsidiaries. Audit fees also include the audit of the consolidated financial statements of United Airlines, employee benefit plan audits, attestation services required by statute or regulation, comfort letters, consents, assistance with and review of documents filed with the SEC, and accounting and financial reporting consultations and research work necessary to comply with generally accepted auditing standards.
Audit-Related Fees
For 2015 and 2014,2019, fees for audit-related services primarily consisted of understanding key process changesaccounting consultations for proposed or future transactions and identifying and testing changes in the internal control environment prior to the implementation of the new revenue accounting system, conversions, and an assessmentwhich went into effect during the third quarter of certain information technology security-related controls.2019. For 2018, fees for audit-related services consisted of consultations related to the adoption of new accounting standards prior to adoption.
Tax Fees
Tax fees for 20152019 and 2014 include2018 relate to professional services provided for preparation of tax returns of federal, foreign and state tax returns, research and consultations regarding tax accounting and tax compliance matters and assistance in assembling data to prepare forreview of U.S. and respond to governmental reviewsinternational tax impacts of past tax filings,certain transactions, exclusive of tax services rendered in connection with the audit.
All Other Fees
Fees for all other services billed in 2015 and 20142018 consist of subscriptions to Ernst & Young LLP's on-line accounting research tool.
Ratification of the Appointment of the Independent Registered Public Accounting Firm |
The Audit Committee has appointed Ernst & Young LLP as the Company's independent registered public accounting firm to audit the Company's consolidated financial statements for the fiscal year 2016.ending December 31, 2020. Ernst & Young LLP has served as the Company's independent registered public accounting firm since 2010.2009. It is anticipated that representatives of Ernst & Young LLP will be present at the Annual Meeting and will have the opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions from those attending the Annual Meeting.
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Ernst & Young LLP rotates its lead audit engagement partner every five years; the Audit Committee interviews proposed candidates and selects the lead audit engagement partner.
The stockholders are being asked to ratify the appointment of Ernst & Young LLP as the independent registered public accounting firm for 2016.the fiscal year ending December 31, 2020. Although ratification is not required by law or the Bylaws, the Board is submitting the appointment to the stockholders as a matter of good corporate governance. In the event of a negative vote on such ratification, the Audit Committee may reconsider its selection. Even if this appointment is ratified, the Audit Committee, in its discretion, may direct the
appointment of a different independent registered public accounting firm at any time during the year if the Audit Committee determines that such a change would be in the best interests of the Company and its stockholders.
THE BOARD AND AUDIT COMMITTEE UNANIMOUSLY RECOMMEND A VOTE "FOR" THE RATIFICATION OF THE APPOINTMENT OF ERNST & YOUNG LLP AS THE COMPANY'S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE FISCAL YEAR 2016,ENDING DECEMBER 31, 2020, WHICH IS DESIGNATED AS PROPOSAL NO. 2.
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Proposal No. 3: Advisory Vote to Approve the Compensation of the Company's Named Executive Officers In accordance with Section 14A of the Exchange Act, we are providing stockholders with the opportunity to vote on an advisory resolution, commonly known as a "say-on-pay" proposal, approving the Company's executive compensation as reported in this proxy statement: RESOLVED, that the stockholders approve the compensation of the named executive officers of United At the Our executive compensation program for As discussed in the CD&A, our core executive compensation Our We urge our stockholders to read the CD&A section of this proxy statement, which discusses in greater detail how our Because this vote is advisory, it will not be binding upon the Board. Moreover, this vote will not be construed as overruling a decision by the Board, creating or implying any additional fiduciary duty by the Board, or restricting or limiting the ability of the Company's stockholders to make proposals for inclusion in proxy materials related to executive compensation. However, the Compensation Committee will take into account the outcome of the vote when considering future executive compensation arrangements. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY'S NAMED EXECUTIVE OFFICERS, WHICH IS DESIGNATED AS PROPOSAL NO. 3. Proposal No. 4: Stockholder Proposal Regarding Stockholder Action by Written Consent John Chevedden, 2215 Nelson Avenue, No. 205, Redondo Beach, California 90278, has advised the Company that he intends to present the following stockholder proposal at the Annual Meeting. Mr. Chevedden has indicated that he holds no fewer than 100 shares of Common Stock. The text of the stockholder proposal and supporting statement appear exactly as received by the Company. All statements contained in the stockholder proposal and supporting statement are the sole responsibility of the proponent and, as a result, the Company is not responsible for any inaccuracies the proposal or statement may contain. The stockholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the proponent. The Board unanimously recommends a vote "AGAINST" the stockholder proposal based on the reasons set forth in the Company's Statement in Opposition following the stockholder proposal. Shareholders request that our board of directors take the steps necessary to permit written consent by shareholders entitled to cast the minimum number of votes that would be necessary to authorize the action at a meeting at which all shareholders entitled to vote thereon were present and voting. This written consent is to give shareholders the fullest power to act by written consent consistent with applicable law. This includes shareholder ability to initiate any appropriate topic for written consent. Hundreds of major companies enable shareholder action by written consent. This proposal topic won majority shareholder support at 13 large companies in a single year. This included 67%-support at both Allstate and Sprint. This proposal topic also won 63%-support at Cigna Corp. (CI) in 2019. This proposal topic would have received higher votes than 63% to 67% at these companies if more shareholders had access to independent proxy voting advice. The right for shareholders to act by written consent is gaining acceptance as a more important right than the right to call a special meeting. This also seems to be the conclusion of the Intel Corporation (INTC) shareholder vote at the 2019 Intel annual meeting. The directors at Intel apparently thought they could divert shareholder attention away from written consent by making it less difficult for shareholders to call a special meeting. However Intel shareholders responded with greater support for written consent in 2019 compared to 2018. After a 45%-vote (less than a majority vote) for a written consent shareholder proposal The Bank of New York Mellon Corporation (BK) said it adopted written consent in 2019. Perhaps BK is starting a new trend in recognizing that a 45%-vote represents a majority vote from the shares that have access to independent proxy voting advice. And a proxy advisor set certain minimum requirements for a company adopting written consent in case the directors of a company are tempted to adopt a "fig leaf' version of written consent. This proposal is especially important to United Continental Holdings shareholders because we may have only a phantom right to call a special shareholder meeting. With the UAL 25% share ownership requirement to call a special meeting it could take 75% of UAL shares to actually call a special meeting. If 75% of shares requested a special meeting then one-third of these shares could be disqualified because they were held for less than one-year. Then another third of shares could be disqualified because they fell short on meeting just one of the tedious requirements (i) through (viii) as called for in the UAL bylaws. Please vote yes: Statement in Opposition to Stockholder Proposal The Board has carefully considered this proposal and, for the reasons set forth below, does not believe that it is in the best interests of the Company and its stockholders and unanimously recommends a vote "AGAINST" the stockholder proposal. The Company's stockholders already have a meaningful right to call special meetings to propose actions for all stockholders to consider between annual meetings. The Board believes that the Company's stockholders are best served by holding meetings whereby all stockholders are provided with notice of the meeting and an opportunity to consider and discuss the proposed actions at the meeting and vote their shares. The Company's Bylaws provide that special meetings of the Company's stockholders may be called at the request of holders of 25% of the Company's outstanding common stock. Our special meeting right gives the Company's stockholders a meaningful ability to propose actions for stockholder consideration between annual meetings while allowing all stockholders to participate. In contrast, this stockholder proposal would enable the owners of only a majority of shares to take action binding all stockholders, without a meeting or an opportunity for stockholders to consider and discuss the proposed action at a meeting, and without ever providing prior notice to other stockholders or the Company. Further, our stockholders have shown support for our existing special meeting right. In 2018, the proponent submitted a shareholder proposal asking our Board to lower the special meeting threshold to 10%. The proposal failed, with only 25% of stockholders present in person or represented by proxy at the 2018 annual meeting of stockholders voting in its favor. We continue to believe that a majority of our stockholders support our special meeting right as currently set forth in our Bylaws. The proposal could effectively disenfranchise minority stockholders who may not have any opportunity to consider or vote upon a matter that is proposed pursuant to a written consent and lead to substantial confusion and disruption for stockholders. Currently, notice of any matter that the Company or its stockholders wish to present for a stockholder vote must be given in advance and the matter must be presented at a meeting. This allows all stockholders to consider, discuss and vote on pending stockholder actions at a meeting. In contrast, the written consent proposal proposed by the proponent would permit a small group of stockholders (including those who accumulate a short-term voting position through the borrowing of shares) with no fiduciary duties to other stockholders to initiate action with no prior notice either to the other stockholders or to the Company. It would also permit action to be taken, with that action binding on all stockholders, without giving all stockholders an opportunity to participate in a meeting and consider arguments, including those of the Company and other stockholders, for and against stockholder actions that may have important ramifications for both the Company and its stockholders. The approach proposed by the proponent would effectively disenfranchise all of those stockholders who do not have the opportunity to participate in the written consent. Permitting stockholder action by written consent could also lead to substantial confusion and disruption for stockholders, with potentially multiple, even conflicting, written consents being solicited by multiple stockholder groups. The Board believes that permitting stockholder action by written consent is not an appropriate corporate governance model for a widely-held public company like United. The Company has other strong corporate governance practices that provide Board accountability and responsiveness to stockholder concerns. The Board further believes that the Company's strong corporate governance framework makes the adoption of this proposal unnecessary. We regularly assess our corporate governance policies to take into account evolving best practices and to address stockholder feedback. In addition to giving stockholders the right to call special meetings, the Company's corporate governance practices and policies already provide transparency and accountability of the Board to all of the Company's stockholders, and demonstrate that the Company is responsive to stockholder concerns. These practices and policies include: We believe that United's comprehensive package of governance practices and policies, including the right to call special meetings, enables stockholders to hold the Board accountable and, where necessary, take prompt action to support their interests. Moreover, our current practices and policies implement those goals without the governance risk to stockholders and the Company that would be associated with action by written consent as contemplated by this stockholder proposal. For the reasons set forth above, the Board believes that the implementation of this proposal is not in the best interests of the Company and its stockholders. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL NO. 4. Proposal No. 5: Stockholder Proposal Regarding a Report on Lobbying Spending The Nathan Cummings Foundation, 475 Tenth Avenue, 14th Floor, New York, New York 10018, has advised the Company that it intends to present the following stockholder proposal at the Annual Meeting. The Nathan Cummings Foundation has indicated that it holds 212 shares of Common Stock. The text of the stockholder proposal and supporting statement appear exactly as received by the Company. All statements contained in the stockholder proposal and supporting statement are the sole responsibility of the proponent and, as a result, the Company is not responsible for any inaccuracies the proposal or statement may contain. The stockholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the proponent. The Board unanimously recommends a vote "AGAINST" the stockholder proposal based on the reasons set forth in the Company's Statement in Opposition following the stockholder proposal. Resolved, the stockholders of United Airlines Holdings, Inc. ("United") request the preparation of a report, updated annually, disclosing its: For the purposes of this proposal, a "grassroots lobbying communication" is a communication directed to the general public that (a) refers to specific legislation or regulation, (b) reflects a view on the legislation or regulation and (c) encourages the recipient of the communication to take action with respect to the legislation or regulation. "Indirect lobbying" is lobbying engaged in by a trade association or other organization of which United is a member. Both "direct and indirect lobbying" and "grassroots lobbying communications" include efforts at the local, state and federal levels. The report shall be presented to the Audit Committee or other relevant oversight committees and posted on United's website. Whereas: The airline industry is extensively regulated, and stockholders seek an understanding of the effectiveness of United's participation in the political process. Full disclosure of United's direct and indirect lobbying activities and expenditures, including lobbying done through trade associations, will aid stockholders in assessing if United's lobbying is consistent with its expressed goals. United spent $36,872,118 from 2010 to 2018 on federal lobbying. United also lobbies at the state level, but state level disclosure is uneven or absent. United does not disclose its memberships in, or payments to, trade associations, or the amounts used by these groups for lobbying. United's CEO is a member of the Business Roundtable, an organization which spent $43,080,000 on lobbying for 2016 and 2017. United is also a member of The International Air Transport Association, which is believed to be lobbying against regional and global climate regulations. (https://bit.ly/2P1jDaD) In contrast, Oscar Munoz, United's CEO, wrote in October 2018, "United Airlines became the first U.S. airline to make a public commitment to reduce our own greenhouse gas emissions—50 percent by the year 2050—furthering our long-standing goal to be the world's most environmentally conscious airline." (https://bit.ly/2R7euQU) United references the Global Reporting Initiative (GRI) in its sustainability reporting, but it fails to report "any differences between its lobbying positions and any stated policies, goals, or other public positions" under GRI Standard 415. According to the 2019 Axios Harris Poll 100, United's reputation ranks in the bottom 15 percent of the 100 most visible American companies, with particularly low scores in "Citizenship" and "Character." We believe reputational damage that might stem from misalignment between general policy positions and actual direct and indirect lobbying efforts could harm long-term value creation by United. Statement in Opposition to Stockholder Proposal The Board has carefully considered this proposal and, for the reasons set forth below, does not believe that it is in the best interests of the Company and its stockholders and unanimously recommends a vote "AGAINST" the stockholder proposal. As part of its analysis, the Board considered that the proponent submitted this identical stockholder proposal at the 2019 annual meeting of stockholders and only 25% of stockholders present in person or represented by proxy at the meeting voted in favor of the proposal. We believe it is in the best interests of our stockholders for the Company to be an effective participant in the political process. The airline industry is subject to extensive regulation. We believe it is important and necessary for the Company to actively engage with lawmakers and government agencies to ensure that they take the interests and needs of our customers, employees, business and the communities we serve into account when making legislative and regulatory decisions. We advocate for policies that rationalize our tax burden, reduce unnecessary regulation, mitigate fuel cost, modernize infrastructure and enhance global competitiveness in the airline industry, among other items. Additional information related to our public policy engagement efforts is publicly available in the "Government and Policies" section of our Corporate Responsibility Report atcrreport.united.com/our-business/government-and-policy. Our lobbying activities are subject to extensive public disclosure requirements and internal oversight. Our lobbying activities are subject to comprehensive regulation at the federal, state and local levels. As required by U.S. federal law, we file quarterly reports that disclose our lobbying expenditures and detail our lobbying activities. These lobbying disclosure reports may be viewed atdisclosurespreview.house.gov by searching for United Airlines, Inc. We file similar publicly available lobbying reports with state and local agencies as required by state and local law, which in some cases have even broader disclosure requirements than federal law. Any lobbying firms we hire are required to file similar reports. The trade associations we belong to are also subject to public disclosure obligations regarding their lobbying efforts. We are committed to the highest ethical standards, and we have procedures and policies in place to ensure that our lobbying activities are subject to appropriate oversight and in the best interests of our stockholders. We take diligent steps to ensure that we are in compliance with applicable rules and regulations and our Code of Ethics and Business Conduct, which is publicly available on our website atir.united.com/static-files/3482652b-31b2-4b3e-be3c-69c773b12e11. Our Government Affairs group reports directly to our Executive Vice President and Chief Administrative Officer, who oversees the group's activities. The Public Responsibility Committee of the Board reviews policies, positioning and practices concerning political and governmental affairs at least annually. In light of all of the above, we believe that the disclosures requested by the proposal are unnecessary. Implementing this proposal may put us at a competitive disadvantage and would impose unnecessary expense on the Company. This proposal seeks to impose requirements on us that could result in competitive harm to the Company. The requested report could put the Company at a disadvantage relative to our competitors, who are not required to disclose this information, by revealing confidential information or proprietary information about our business or strategy. We believe that any additional lobbying disclosure requirements that go beyond those required under existing law should be applicable to all participants engaged in the political process, rather than to us alone, as the proposal requests. The Company's lobbying expenditures are not financially material to the Company. In 2019, the Company's total expenses relating to lobbying were insignificant when compared to the Company's total operating costs. Given the amount of information publicly available through existing public disclosure requirements, we believe using additional funds to generate the report requested by this proposal would not be an appropriate use of corporate resources. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL NO. 5. Proposal No. 6: Stockholder Proposal Regarding a Report on Global Warming-Related Lobbying Activities BNP Paribas Asset Management, 200 Park Avenue, 11th Floor, New York, NY 10166, has advised the Company that it intends to present the following stockholder proposal at the Annual Meeting. BNP Paribas Asset Management has indicated that it holds 862 shares of Common Stock. The text of the stockholder proposal and supporting statement appear exactly as received by the Company. All statements contained in the stockholder proposal and supporting statement are the sole responsibility of the proponent and, as a result, the Company is not responsible for any inaccuracies the proposal or statement may contain. The stockholder proposal will be voted on at the Annual Meeting only if properly presented by or on behalf of the proponent. The Board unanimously recommends a vote "AGAINST" the stockholder proposal based on the reasons set forth in the Company's Statement in Opposition following the stockholder proposal. Shareholders request that the Board of Directors conduct an evaluation and issue a report within the next year (at reasonable cost, omitting proprietary information) describing if, and how, United Airlines' lobbying activities (direct and through trade associations) align with the goal of limiting average global warming to well below 2 degrees Celsius (the Paris Climate Agreement's goal). The report should also address the risks presented by any misaligned lobbying and the company's plans, if any, to mitigate these risks. According to the most recent annual 'Emissions Gap Report' issued by the United Nations Environment Programme (November 26, 2019), critical gaps remain between the commitments national governments have made and the actions required to prevent the worst effects of climate change. Companies have an important and constructive role to play in enabling policy-makers to close these gaps. Corporate lobbying activities that are inconsistent with meeting the goals of the Paris Agreement present regulatory, reputational and legal risks to investors. These efforts also present systemic risks to our economies, as delays in implementation of the Paris Agreement increase the physical risks of climate change, pose a systemic risk to economic stability and introduce uncertainty and volatility into our portfolios. We believe that Paris-aligned climate lobbying helps to mitigate these risks, and contributes positively to the long-term value of our investment portfolios. Of particular concern are the trade associations and other politically active organizations that speak for business but, unfortunately, too often present forceful obstacles to progress in addressing the climate crisis. As investors, we view fulfillment of the Paris Agreement's agreed goal—to hold the increase in the global average temperature to 'well below' 2°C above preindustrial levels, and to pursue efforts to limit the temperature increase to 1.5°C—as an imperative. We are convinced that unabated climate change will have a devastating impact on our clients, plan beneficiaries, and the value of their portfolios. We see future 'business as usual' scenarios of 3-4°C or greater as both unacceptable and uninvestable. We commend United Airlines for responding to CDP's annual climate change survey, including information on the company's direct (in the company's name) and indirect (through trade associations and other organizations) lobbying efforts related to climate change and their consistency with corporate policy. Two hundred institutional investors managing $6.5 trillion recently wrote to United Airlines, seeking an answer to a different question: How does United Airlines work to ensure that its direct and indirect lobbying activities align with the Paris Agreement's goals, and what does the company do to address any misalignments it has found? The investors received no response to their letter. Thus, we urge the Board and management to assess the company's climate related lobbying and report to shareholders. The Board has carefully considered this proposal and, for the reasons set forth below, does not believe that it is in the best interests of the Company and its stockholders and unanimously recommends a vote "AGAINST" the stockholder proposal. The Company is an industry leader in environmental sustainability The Company is committed to operating an environmentally sustainable and responsible airline. This means we are constantly working to minimize our environmental impact and are continuously looking for new ways to reduce our carbon footprint in the air, on the ground and at our facilities. Since 1990, we have improved our fuel efficiency by more than 45%. In September 2018, the Company announced a pledge to reduce its greenhouse gas emissions by 50% relative to 2005 levels by the year 2050. We were the first U.S. airline to publicly commit to reduce its individual carbon emissions by 50%. We have taken various actions that are expected to help reduce our carbon dioxide emissions over time, including purchasing sustainable aviation fuel and making significant investments in sustainable aviation fuel producers. To help achieve our goals, we have also made significant investments in a modern, fuel-efficient fleet while implementing operational and procedural changes to drive fuel conservation. In addition, over 4,000 pieces of the Company's ground service equipment in use around the world are electric or use alternative fuels. United has office space in LEED certified buildings in various locations, including Chicago, Houston and San Francisco, and is regularly evaluating ways to reduce its non-fuel energy use at other facilities across the Company's network. More information about the Company's commitment to environmental sustainability and pledge to reduce our greenhouse gas emissions is available under "Corporate Governance—Environmental Sustainability" and atwww.united.com/ual/en/us/fly/company/global-citizenship/environment/fuel-efficiency-and-emissions-reduction.html. We believe it is in the best interests of our stockholders for the Company to be an effective participant in the political process. Climate change is a serious global issue and is of vital interest to the airline industry. The legislation of any laws or regulations imposed by state and federal lawmakers or other regulatory bodies on this issue may greatly affect our business. We believe it is important and necessary for the Company to actively engage with lawmakers and government agencies to ensure that they take the interests and needs of our customers, employees, business and the communities we serve into account when making legislative and regulatory decisions. We routinely evaluate our engagement process to ensure that we are obtaining commensurate business value that further enables us to advance our interests, while staying true to our stated goals, including our environmental and sustainability goals. Additional information related to our public policy engagement efforts is publicly available in the "Government and Policies" section of our Corporate Responsibility Report atcrreport.united.com/our-business/government-and-policy. Our lobbying activities are subject to extensive public disclosure requirements and internal oversight. As stated in the Company's statement in opposition to Proposal 5, the Company's policies and available information relating to its lobbying activities sufficiently address the concerns outlined in the proposal. Accordingly, we believe using additional funds to generate the report requested by this proposal would not be an appropriate use of corporate resources. Implementing this proposal may put us at a competitive disadvantage and would impose unnecessary expense on the Company. As stated in the Company's statement in opposition to Proposal 5, the Company's policies and available information relating to its lobbying activities sufficiently address the concerns outlined in the proposal. Accordingly, we believe using additional funds to generate the report requested by this proposal would not be an appropriate use of corporate resources. The implementation of this proposal could also result in competitive harm to the Company, similar to the competitive harm described in our statement in opposition to Proposal 5. As articulated in our opposition to Proposal 5, the proposal asks for a report that none of our competitors are required to disclose, putting us at a disadvantage relative to them by compelling us to reveal confidential information or proprietary information about our business or strategy. We believe that any additional lobbying disclosure requirements that go beyond those required under existing law should be applicable to all participants engaged in the political process, rather than to us alone, as the proposal requests. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE "AGAINST" PROPOSAL NO. 6. General Information About the Annual Meeting The Board is soliciting your vote at the Annual Meeting. Where and when will the Annual Meeting take place? The Annual Meeting will be held virtually, on Wednesday, May 20, 2020, at 9:00 a.m., Central Time, via the Internet atwww.virtualshareholdermeeting.com/UAL2020. In light of the COVID-19 pandemic, for the safety of all of our people, including our stockholders, and taking into account recent federal, state and local guidance that has been issued, we have determined that the Annual Meeting will be held in a virtual meeting format only, with no physical in-person meeting. At our virtual Annual Meeting, stockholders will be able to attend, vote and submit questions via the Internet. Whether or not you plan to attend the Annual Meeting, we urge you to vote and submit your proxy in advance of the meeting by one of the methods described in these proxy materials. How can I attend the Annual Meeting? Stockholders as of the record date (or their duly appointed proxy holder) may attend, vote and submit questions virtually at the Annual Meeting by logging in atwww.virtualshareholdermeeting.com/UAL2020. To log in, stockholders (or their authorized representatives) will need the control number provided on their proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials. If you are not a stockholder or do not have a control number, you may still access the meeting as a guest, but you will not be able to submit questions or vote at the meeting. The meeting will begin promptly at 9:00 a.m., Central Time, on Wednesday, May 20, 2020. We encourage you to access the meeting prior to the start time. Online access will open at 8:45 a.m., Central Time, and you should allow ample time to log in to the meeting webcast and test your computer audio system. We recommend that you carefully review the procedures needed to gain admission in advance. Can I ask questions at the virtual Annual Meeting? Stockholders as of the record date who attend and participate in our virtual Annual Meeting will have an opportunity to submit questions live via the Internet during a designated portion of the meeting. Stockholders must have available their control number provided on their proxy card, voting instruction form or Notice of Internet Availability of Proxy Materials. What if I have technical difficulties or trouble accessing the virtual Annual Meeting? We will have technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting. If you encounter any difficulties accessing the virtual meeting during check-in or during the meeting, please call the technical support number that will be posted on the virtual shareholder meeting login page:www.virtualshareholdermeeting.com/UAL2020. If you are a stockholder with shares of our voting stock, including our Common Stock, registered in your name with Computershare Investor Services, the Company's transfer agent and registrar, then you are considered a "stockholder of record." Stockholders of record at the close of business on April 1, 2020, which is known as the "record date" for the Annual Meeting, are entitled to notice of and to vote at the Annual Meeting or any adjournments or postponements thereof. A list of the names of stockholders entitled to vote at the Annual Meeting will be available to stockholders for ten days prior to the Annual Meeting for any purpose germane to the Annual Meeting. Please contact our Corporate Secretary at UALBoard@united.com if you wish to examine the list prior to the Annual Meeting. The stockholder list will also be available during the virtual Annual Meeting for examination by any stockholder atwww.virtualshareholdermeeting.com/UAL2020. The following chart shows the number of shares of each class of our voting stock outstanding as of the record date, the number of record holders of each class as of the record date entitled to vote at the Annual Meeting, the votes per share for each class for all matters on which the shares vote, and the directors each class is entitled to elect. The aggregate number of votes to which a class is entitled is equal to the number of shares outstanding of such class. Title of Class Common Stock Class Pilot MEC Junior Preferred Stock Class IAM Junior Preferred Stock How do I vote if I am a stockholder of record? If you are a stockholder of record that holds shares as of the record date, you have three options for delivering your proxy to vote your shares: Vote by Internet You can vote via the Internet by logging ontowww.proxyvote.com and following the prompts using the control number located on your Notice of Internet Availability of Proxy Materials or proxy card. This vote will be counted immediately, and there is no need to mail your proxy card. Vote by Telephone To use the telephone voting procedure, dial 1-800-690-6903 and listen for further directions. You must use a touch-tone telephone in order to respond to the questions. This vote will be counted immediately, and there is no need to mail your proxy card. Vote by Mail Shares eligible to be voted, and for which a properly signed proxy card is returned, will be voted in accordance with the instructions specified on the proxy card. Proxies submitted by Internet or telephone must be received by 10:59 p.m., Central Time, on Tuesday, May 19, 2020, the day before the Annual Meeting. We encourage you to vote by Internet as instructed on the Notice of Internet Availability of Proxy Materials or proxy card. How are my shares voted if I do not indicate how to vote on the proxy card? If we receive a properly signed and dated proxy card and the proxy card does not specify how your shares are to be voted, your shares will be voted in accordance with the recommendations of the Board, including FOR the election of each of the nominees for director (Proposal No. 1), FOR the ratification of the appointment of Ernst & Young LLP as the Company's independent registered public accounting firm for the fiscal year ending December 31, 2020 (Proposal No. 2), FOR the advisory vote to approve the compensation of the Company's named executive officers (Proposal No. 3), AGAINST the stockholder proposal regarding stockholder action by written consent, if properly presented before the meeting (Proposal No. 4), AGAINST the stockholder proposal regarding a report on lobbying spending, if properly presented before the meeting (Proposal No. 5) and AGAINST the stockholder proposal regarding a report on global warming-related lobbying activities, if properly presented before the meeting (Proposal No. 6). How do I vote if I hold my shares through an account at a broker, bank, trust or other nominee? If you hold your shares in an account at a broker, bank, trust or other nominee, you are considered the "beneficial owner" of shares held in "street name," and you should have received a Notice of Internet Availability of Proxy Materials or voting instruction card and voting instructions with these proxy materials from that organization rather than from us. To ensure that your vote is counted, follow the directions set forth on the Notice of Internet Availability of Proxy Materials or voting instruction card and the voting instructions that you receive. To vote during the virtual Annual Meeting, you will need the 16-digit control number included on your Notice of Internet Availability of Proxy Materials or voting instruction card. How do I vote my shares if I participate in one of the United 401(k) plans? If you hold shares in an account under the United Airlines 401(k) Savings Plan or the United Airlines Flight Attendant 401(k) Plan (each a "Plan," and collectively, the "United 401(k) Plans"), Broadridge Financial Solutions, Inc. ("Broadridge") is sending you the Company's Notice of Internet Availability of Proxy Materials or proxy materials directly, including the proxy card. You may direct the trustee of the United 401(k) Plans, Newport Trust Company, on how to vote your Plan shares by directing the voting of your Plan shares by Internet, telephone or mail pursuant to the instructions included on the Notice of Internet Availability of Proxy Materials or proxy card. Please note that, in order to permit the trustee for the United 401(k) Plans to tally and vote all of the shares of Common Stock held in the United 401(k) Plans, your instructions, whether by Internet, telephone or proxy card, must be completed and received prior to 10:59 p.m., Central Time, on Sunday, May 17, 2020. You may not change your vote related to such Plan shares after this deadline. If you do not provide voting instructions to the trustee, your Plan shares will be voted by the trustee in the same proportion that it votes shares in other Plan accounts for which it did receive timely voting instructions. The proportional voting policy is detailed under the terms of each Plan and trust agreement. Why did I receive a notice in the mail regarding the Internet availability of proxy materials instead of a full set of proxy materials? Pursuant to rules adopted by the SEC, the Company has elected to provide access to its proxy materials via the Internet. Accordingly, the Company is sending a Notice of Internet Availability of Proxy Materials to the Company's stockholders. All stockholders will have the ability to access the proxy materials on the website referred to in the notice or request a printed set of the proxy materials. Instructions on how to access the proxy materials over the Internet or to request a printed copy may be found in the notice. In addition, stockholders may request proxy materials in printed form by mail or electronically by email on an ongoing basis. The Company encourages stockholders to take advantage of the availability of the proxy materials on the Internet to help reduce the expenses incurred by the Company in connection with the Annual Meeting and to reduce the environmental impact of the Annual Meeting. How can I get electronic access to the proxy materials? The Notice of Internet Availability of Proxy Materials will provide you with instructions regarding how to: Choosing to receive future proxy materials by email will save the Company the cost of printing and mailing documents to you. If you choose to receive future proxy materials by email, you will receive an email message next year with instructions containing a link to those materials and a link to the proxy voting website. Your election to receive proxy materials by email will remain in effect until you terminate it. What does it mean if I receive more than one set of proxy materials? If you receive more than one Notice of Internet Availability of Proxy Materials or sets of proxy materials, your shares are registered in more than one name or are registered in different accounts. In order to vote all of the shares that you own, you must either sign and return all of the proxy cards or follow the instructions for any alternative voting procedure on each of the Notices of Internet Availability of Proxy Materials or proxy cards that you receive. Representatives of Broadridge will tabulate the votes and act as Inspector of Election at the Annual Meeting. A quorum is necessary for conducting a valid Annual Meeting. The presence in person or represented by proxy of the holders of outstanding shares representing at least a majority of the total voting power entitled to vote at the Annual Meeting is necessary to constitute a quorum at the Annual Meeting. Virtual attendance at our Annual Meeting constitutes presence in person for purposes of quorum at the meeting. Where a separate vote of a class or series of stock is required, the presence in person or represented by proxy of the holders of outstanding shares representing at least a majority of the total voting power of all outstanding shares of such class or series is necessary to constitute a quorum thereof entitled to take action with respect to such separate vote. Under Nasdaq Listing Rules, brokers, banks, trusts or other nominees holding shares on behalf of a beneficial owner may vote those shares in their discretion on certain "routine" matters even if they do not receive timely voting instructions from the beneficial owner. With respect to "non-routine" matters, the broker, bank, trust or other nominee is not permitted to vote shares for a beneficial owner without timely received voting instructions. A broker non-vote occurs when a beneficial owner of shares held by a broker, bank, trust or other nominee fails to provide the record holder with specific instructions concerning how to vote on any "non-routine" matters brought to a vote at a stockholders meeting. At the Annual Meeting, brokers will have discretionary authority to vote shares on the ratification of the appointment of the independent registered public accounting firm (Proposal No. 2), which is the only "routine" matter to be presented at the Annual Meeting. If brokers exercise this discretionary voting authority on Proposal No. 2, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting (Proposal Nos. 1, 3, 4, 5 and 6), which are considered "non-routine." How are abstentions and broker non-votes treated for quorum purposes, and how do they impact the voting results? Abstentions are counted for purposes of determining whether a quorum is present. Abstentions will have the effect of a vote against the matters presented for a vote of the stockholders, other than the election of directors (Proposal No. 1). Abstentions have no effect with respect to the election of directors. As explained above under "What are 'broker non-votes'?," if brokers exercise their discretionary voting authority on Proposal No. 2, such shares will be considered present at the Annual Meeting for quorum purposes and broker non-votes will occur as to each of the other proposals presented at the Annual Meeting (Proposal Nos. 1, 3, 4, 5 and 6), which are considered "non-routine." Broker non-votes will have no impact on the voting results on the election of directors (Proposal No. 1), the advisory vote to approve the compensation of the Company's named executive officers (Proposal No. 3), or the stockholder proposals (Proposal Nos. 4, 5 and 6). If you are a beneficial owner of shares held by a broker, bank, trust or other nominee holding shares on your behalf, we urge you to submit your voting instructions to your broker, bank, trust or other nominee in advance of the Annual Meeting. Please see "How do I vote if I hold my shares through an account at a broker, bank, trust or other nominee?" above for a discussion of the procedures. What classes of stock vote on each proposal, and what is the vote required? The holders of Common Stock, Class Pilot MEC Junior Preferred Stock and Class IAM Junior Preferred Stock will vote together as a single class on all proposals presented at the Annual Meeting other than the election of directors (Proposal No. 1). Election of Directors (Proposal No. 1) Each director will be elected by vote of a majority of the votes cast with respect to that director's election in person or represented by proxy and entitled to vote on the election of directors. "Majority of the votes cast" means that the number of shares voted FOR a director exceeds the number of shares voted AGAINST that director (with abstentions and broker non-votes not counted as a vote cast either FOR or AGAINST that director's election). Any incumbent director who is not reelected in an election in which majority voting applies is required to tender his or her resignation promptly following certification of the stockholders' vote. The Nominating/Governance Committee will then consider the tendered resignation and recommend to the Board whether to accept or reject the resignation offer, or whether other action should be taken. The Board is expected to act on the recommendation within 120 days following certification of the stockholders' vote and will promptly disclose its decision regarding whether to accept the director's resignation offer. The director who tenders his or her resignation will not participate in the recommendation of the Nominating/Governance Committee or the decision of the Board with respect to his or her resignation. Proposal Nos. 2, 3, 4, 5 and 6 The affirmative vote of a majority in voting power of the shares present in person or represented by proxy at the Annual Meeting and entitled to vote on the matter will be required to approve the ratification of the appointment of the independent registered public accounting firm (Proposal No. 2), the advisory vote to approve the compensation of the Company's named executive officers (Proposal No. 3) and the stockholder proposals (Proposal Nos. 4, 5 and 6). How does the proxy voting process work? If you vote using the Internet or telephone procedures, or your proxy card is properly dated, signed and returned by mail, the proxy will be voted at the Annual Meeting in accordance with the instructions indicated by it (or if there are no such instructions, then in accordance with the recommendations of the Board). If a quorum is not present at the time the Annual Meeting is convened for any particular purpose, or if for any other reason we believe that additional time should be allowed for the solicitation of proxies, we may adjourn the Annual Meeting with the vote of the stockholders then present. Any proxy may be revoked by the person giving it at any time before it is voted (except as discussed above with respect to shares held in a Plan account). A proxy may be revoked by a later proxy delivered using the Internet or telephone voting procedures or by written notice mailed to the Secretary of the Company prior to the Annual Meeting. If you hold your shares through a broker, bank, trust or other nominee, you should follow their instructions as to how you can revoke a proxy. Attendance at the Annual Meeting will not automatically revoke a proxy, but a holder of Common Stock who is in attendance and entitled to vote at the Annual Meeting may vote during the Annual Meeting, which revokes a previously granted proxy. Who pays solicitation expenses? All expenses of the solicitation, including the cost of preparing and mailing this proxy statement, will be borne by us. Arrangements will also be made with custodians, nominees and fiduciaries for forwarding of proxy solicitation material to beneficial owners of Common Stock and voting preferred stock held of record, and we may reimburse these individuals for their reasonable expenses. In addition to mailed proxy materials and proxy materials available over the Internet, our directors, officers and employees may also solicit proxies in person, by telephone or by other means of communication. These individuals will not be additionally compensated, but may be reimbursed for out-of-pocket expenses associated with solicitation. To help assure the attendance or representation by proxy of the largest number of stockholders possible, we have engaged D.F. King & Co., Inc. ("D.F. King"), a proxy solicitation firm, to solicit proxies on our behalf. We expect to pay D.F. King a proxy solicitation fee of approximately $17,500 plus reimbursement for reasonable out-of-pocket costs and expenses for its services. Could other matters be decided at the Annual Meeting? We do not know of any matters that will be considered at the Annual Meeting other than Proposal Nos. 1, 2, 3, 4, 5 and 6. If any other matters are properly presented at the Annual Meeting, the proxies will be voted at the discretion of the proxy holders. Submission of Stockholder Proposals for the 2021 Annual Meeting If a stockholder of record wishes to submit a proposal for inclusion in Stockholders who intend to submit director nominees for inclusion in the Company's proxy materials for the To propose business or nominate a director at the Householding The rules of the SEC allow us to deliver a single Notice of Internet Availability of Proxy Materials or set of proxy materials to one address shared by two or more of our stockholders. This delivery method is referred to as "householding" and can result in significant cost savings. To take advantage of this opportunity, we have delivered only one Notice of Internet Availability of Proxy Materials or set of proxy materials to multiple stockholders who share an address, unless we have received different instructions from the impacted stockholders prior to the mailing date. We agree to deliver promptly, upon written or oral request, a separate Notice of Internet Availability of Proxy Materials or set of proxy materials, as requested, to any stockholder at the shared address to which a single copy of those documents was delivered. If you prefer to receive separate copies of the Notice of Internet Availability of Proxy Materials and proxy materials, contact Broadridge by telephone at (866) 540-7095 or in writing at Broadridge, Householding Department, 51 Mercedes Way, Edgewood, New York 11717. If you are currently a stockholder sharing an address with another stockholder and are receiving multiple copies of our Notice of Internet Availability of Proxy Materials or proxy materials and wish to receive only one copy of future Notices of Internet Availability of Proxy Materials and proxy materials for your household, please contact Broadridge at the above telephone number or address. Annual Report A copy of our COPIES OF OUR Other Business The Company knows of no other matters to be submitted to stockholders at the Annual Meeting, other than the proposals referred to in this proxy statement. If any other matters properly come before the stockholders at the Annual Meeting, it is the intention of the proxy holders to vote the shares represented thereby on such matters in accordance with the Board's recommendations. Appendix A The Company evaluates its financial performance utilizing various accounting principles generally accepted in the United States of America ("GAAP") and The Company adjusted its pre-tax income in accordance with the AIP award terms for 2019. The Company's AIP program requires a fuel adjustment if and to the extent that full year 2019 forecast fuel price changed by more than 5% in either direction of the February 2018 forecast price of $2.21. For additional information related to 2019 special (in millions, except percentages) Pre-tax income (GAAP) Special charges: Impairment of assets Severance and benefit costs (Gains) losses on sale of assets and other special charges Total special charges Unrealized (gains) losses on investments, net Fuel adjustment Adjusted pre-tax income for AIP (Non-GAAP) Pre-tax income (GAAP) Total special charges (see above) Unrealized (gains) losses on investments, net Interest expense on ERJ 145 finance leases Adjusted pre-tax income (Non-GAAP) Total operating revenue Pre-tax margin (GAAP) Adjusted pre-tax margin (Non-GAAP) (in millions, except per share amounts) Net income (GAAP) Total special charges (see above) Unrealized (gains) losses on investments, net Interest expense on ERJ 145 finance leases Income tax benefit related to adjustments above Adjusted net income (Non-GAAP) Diluted weighted average shares as of the year-ended December 31, 2019 Diluted earnings per share (GAAP) Total special charges (see above) Unrealized (gains) losses on investments, net Interest expense on ERJ 145 finance leases Income tax benefit related to adjustments above Adjusted diluted earnings per share (Non-GAAP) VOTE BY INTERNET Before The Meeting - Go to www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information up until 10:59 p.m. Central Time on Tuesday, May 19, 2020. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. UNITED AIRLINES HOLDINGS, INC. 233 SOUTH WACKER DRIVE CHICAGO, IL 60606 Voting instructions to the trustee of the United 401(k) plans must be received by 10:59 p.m. Central Time on Sunday, May 17, 2020. During The Meeting - Go to www.virtualshareholdermeeting.com/UAL2020 You may attend the meeting via the Internet and vote during the meeting. Have the information that is printed in the box marked by the arrow available and follow the instructions. VOTE BY PHONE - 1-800-690-6903 Use any touch-tone telephone to transmit your voting instructions up until 10:59 p.m. Central Time on Tuesday, May 19, 2020. Have your proxy card in hand when you call and then follow the instructions. VOTE BY MAIL Mark, sign and date your proxy card and return it in the postage-paid envelope we have provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: D09175-Z77032 KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THIS PORTION ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. UNITED AIRLINES HOLDINGS, INC. The Board of Directors recommends you vote FOR the following proposals: 1. Election of Directors Nominees: For Against Abstain ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! ! For Against Abstain 1a. Carolyn Corvi 2. Ratification of the Appointment of Ernst & Young LLP as the Company's Independent Registered Public Accounting Firm for the Fiscal Year Ending December 31, 2020 Advisory Vote to Approve the Compensation of the Company's Income before income taxes Less: Special items before income tax benefit Income before income taxes and excluding special items NOPAT adjustments Net Operating Profit After Cash Tax (NOPAT) Effective tax rate Invested Capital (five-quarter average): Total assets Invested capital adjustments Average invested capital Return on invested capital Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting: The Notice and Proxy Statement, Annual Report and 401(k) Plans Letter are available at www.proxyvote.com. D09176-Z77032 UNITED AIRLINES HOLDINGS, INC. Annual Meeting of Stockholders May 20, 2020 9:00 AM Central Time This proxy is solicited by the Board of Directors The stockholder(s) hereby appoint(s) Oscar Munoz and Brett J. Hart, or either of them, as proxies, each with the power to appoint his substitute, and hereby authorize(s) them to represent and to vote, as designated on the reverse side of this ballot and, in their discretion, on such other matters as may properly come before the Annual Meeting of Stockholders, all of the shares of Common Stock of United Airlines Holdings, Inc. that the stockholder(s) is/are entitled to vote at the Annual Meeting of Stockholders to be held at 9:00 a.m., Central Time on Wednesday May 20, 2020, at www.virtualshareholdermeeting.com/UAL2020, and any adjournment or postponement thereof, unless otherwise specified herein. THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER(S). IF NO SUCH DIRECTIONS ARE MADE, THIS PROXY WILL BE VOTED FOR THE ELECTION OF THE NOMINEES LISTED ON THE REVERSE SIDE FOR THE BOARD OF DIRECTORS, FOR PROPOSALS 2 AND 3, AND AGAINST PROPOSALS 4, 5 AND 6. IN THEIR DISCRETION, THE PROXIES ARE EACH AUTHORIZED TO VOTE UPON OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING. EMPLOYEES/PARTICIPANTS HOLDING SHARES IN UNITED AIRLINES 401(K) PLANS: This card constitutes your voting instructions to Newport Trust Company or its successor, as trustee under the United Airlines 401(k) plans. By signing on the reverse side, you are instructing the trustee to vote the shares of Common Stock of United Airlines Holdings, Inc. held in the 401(k) plan in which you participate with regard to the matters listed on the reverse side of this proxy card and to act in its discretion upon other matters as may properly come before the Annual Meeting of Stockholders or any adjournments or postponements thereof, all as set forth in the Notice to Plan Participants. Your voting instructions to the trustee are confidential. If properly executed and timely received, this voting instruction card will constitute a direction to the trustee to vote on the matters as directed. In its discretion, the trustee is authorized to vote upon other business as may properly come before the Annual Meeting of Stockholders. If no choice is made or no timely direction is received, the trustee will vote the shares in proportion to allocated shares in such plan for which timely instructions are received, subject to applicable law. The proxies cannot vote the shares, and the trustee cannot ensure that your instructions are tabulated, unless you vote or instruct the trustee by telephone, Internet or sign and return this card. Voting instructions to the trustee from employees/participants holding shares in the 401(k) plans must be received prior to 10:59 p.m., Central Time, on Sunday, May 17, 2020. Votes from all other stockholders that are submitted by Internet or telephone must be received prior to 10:59 p.m., Central Time, on Tuesday, May 19, 2020. (If you noted any Address Changes/Comments above, please mark corresponding box on the reverse side.) Continued and to be signed on reverse side Address Changes/Comments: ADVISORY VOTE TO APPROVE THE COMPENSATION OF THE COMPANY'S NAMEDEXECUTIVE OFFICERSContinentalAirlines Holdings, Inc., as disclosed in the proxy statement for the 20162020 Annual Meeting of Stockholders under the section captioned "Executive Compensation" including the Compensation Discussion and Analysis, the compensation tables, the accompanying footnotes, and the related disclosure contained therein.20112017 annual meeting of stockholders, stockholders were asked to cast a non-binding advisory vote on whether the say-on-pay vote should be held every year, every two years or every three years (the "Frequency Vote"). A majority of stockholders voting on the matter indicated a preference for holding the say-on-pay vote on an annual basis. Accordingly, the Board resolved that the non-binding advisory vote to approve the compensation of the Company's named executive officers will be held on an annual basis at least until the next2023 Frequency Vote is held.Vote. At the Company's annual meeting on June 10, 2015,May 22, 2019, approximately 98%96% of the votes cast were voted in favor of the "say-on-pay"say-on-pay proposal.20152019 is described in this proxy statement under the section captioned "Executive Compensation" including the Compensation Discussion and Analysis, ("CD&A"), the compensation tables, the accompanying footnotes, and the related disclosure contained therein.programs are designedphilosophy continues to fulfillbe based on achieving the following principles:objectives: (i) aligning the interests of our stockholders and executives; (ii) linking executive pay to performance; and (iii) attracting, retaining and appropriately rewarding our executives in line with market practices. We believe the foregoing objectives are reflected in the 2019 incentive compensation program design approved by the Compensation Committee in February 2019. Our programs include focus on the United customer experience. The Compensation Committee continues to evaluate United's progress toward improving the customer experience.20152019 executive compensation policies and practices include the following features, which we believe illustrate our commitment to corporate governance "best practices" and the program principles stated above:described in the CD&A:
(pre-tax income, customer satisfaction, ROIC, relative pre-tax margin, and stock price) to motivate and reward achievements that we believe are complementary of one another and that contribute to the long-term creation of stockholder value.value, including:Focus on both relative and absolute performance goals. We utilize performance measures that emphasize both relative andUse of absolute performance goals includingbalanced with consideration of relative pre-tax margin (which measures Company performance against peers and use of overlapping performance periods in comparison to an industry peer group), pre-tax income, ROIC, customer satisfaction and stock price, which provide the primary links betweenlong-term incentive compensation and the Company's business strategy and financial results.program.levelslevels..We have maintainedFor 2019 compensation decisions, the Compensation Committee retained the same standards for our peer group since it was established in 2011 following the Merger. Our peer groupused for compensation benchmarking purposesin the prior year. Our peer group was carefully selected to include well-run companies in general industry, with a primary focus on airlines, customer service-oriented companies in the travel industry, aerospace and transportation companies; companies of similar revenue size (i.e.(i.e., 0.5-2.0 times UAL'sthe Company's revenue); and the largest U.S.-based airlines (regardless of revenue range). We have maintained these same general standards for our peer group since 2011. In addition, we consider the compensation practices at our primary airline competitors (American, Delta and Southwest), which companies are included in our benchmarking peer group.AllOur long-term incentivesincentive awards have "double-trigger" accelerated vesting provisions. A "double-trigger" means that acceleration of vesting requires two events: first, the transaction that represents thea change in control,control; and second, a qualified termination of service, such as an involuntary termination without "cause."(CEO—5xas follows: CEO—6x base salary; President—4x base salary; EVP—3x base salary; SVP—2x base salary; SVP—and VP—1x base salary).salary. A newly hired or promoted officer has five years to achieve the stock ownership targets set forth in the guidelines.provision.provisions. OurWe have a claw-back policy that provides the Compensation Committee with discretion to require the return, repayment or forfeiture of any annual or long-term incentive compensation payment or award to a covered executive if the Compensation Committee determines that the executive engaged in misconduct that resulted in a material violation of (i) federal or state law that caused a material adverse impact to the Company's financial statements or reputation or (ii) the Company's Code of Ethics and Business Conduct that caused a material adverse impact to the Company's financial statements or reputation. All our NEOs are covered by the claw-back policy, which has a three-year look back period from the time of a triggering event. In addition, our programs include claw-back provisions requiring the return of incentive payments in certain financial restatement situations.otherour frontline employees receive a profit-sharing payment for the year.
program hasprograms have been designed with features to mitigate against the risk of inappropriate behavior.discourage excessive risk-taking by our executives.policiesbenefits for our officers, other thanofficers. These benefits are set forth in severance plans applicable by officer level or, in the CEO. We previously eliminatedcase of our CEO, through his employment agreements for all officers other than our CEO.agreement.20112017 annual meeting of stockholders.meeting.regularly communicate with the investment community regarding our long-term strategy and relative to our operating, financial and customer satisfaction goals. Management and the Board strive to provide our investors with relevant and reliable information to provide transparency regarding our financial performance that is linked to our incentive awards, particularly the linkage between our compensation program and our ROIC.projections.20152019 executive compensation program implemented our guiding principles. We are asking our stockholders to indicate their support for our named executive officer compensation as described in this proxy statement.
Proposal 4—Adopt a Mainstream Shareholder Right—Written Consent
Adopt a Mainstream Shareholder Right—Written Consent—Proposal 4SUBMISSION OF STOCKHOLDER PROPOSALS FOR THE 2017 ANNUAL MEETINGStockholder Proposal Regarding a Report on Lobbying Spending
Shares
OutstandingHolders of
Record(a)Votes per
ShareVoting for
Directors 247,256,855 5,344 1 Class elects
11 directors 1 1 1 Class elects
1 director 1 1 1 Class elects
1 director next year'sthe Company's proxy statement for the 2021 annual meeting of stockholders, the proposal must be received by the Company no later than December 30, 201610, 2020 and otherwise comply with SEC rules. Failure to otherwise comply with SEC rules will cause the proposal to be excluded from the proxy materials. All notices must be submitted to the Corporate Secretary—United ContinentalAirlines Holdings, Inc., 233 S. Wacker Drive, Chicago, Illinois 60606.20172021 annual meeting of stockholders must comply with the requirements of proxy access as set forth in the Bylaws. The stockholder or group of stockholders who wish to submit director nominees pursuant to proxy access must deliver the required materials to the Company no earlier than November 30, 2016,10, 2020, and no later than December 30, 2016. As previously disclosed, pursuant to the Settlement Agreement, the Nominating/Governance Committee, PAR and Altimeter will work together in good faith to identify an additional independent director as promptly as possible who is mutually agreeable to the Board, PAR and Altimeter. Under the terms of the Settlement Agreement, following the identification of the new independent director, the Board will promptly appoint the new independent director to the Board and is obligated to nominate and recommend the new independent director for election at the 2017 annual meeting of stockholders, subject to certain exceptions as set forth in the Settlement Agreement. Due to this agreement, the number of nominees for director that may be included in the Company's proxy materials pursuant to the proxy access provisions of the Bylaws for the 2017 annual meeting of stockholders will be reduced by one, and may be further reduced as set forth in the Bylaws.10, 2020.20172021 annual meeting of stockholders without inclusion of such matters in our proxy materials, proper notice must be submitted by a stockholder of record no earlier than February 8, 2017January 20, 2021 and no later than March 10, 2017February 19, 2021 in accordance with the Bylaws. The notice must contain the information required by the Bylaws. No business proposed by a stockholder can be transacted at the 20172021 annual meeting of stockholders, and no nomination by a stockholder will be considered, unless the notice satisfies the requirements of the Bylaws. If we do not receive timely notice of any other matter that a stockholder wishes to raise at the 20172021 annual meeting of stockholders, the Bylaws provide that the matter shall not be transacted and the nomination shall not be considered.20152019 Form 10-K has been made available with this proxy statement and is also available athttp://www.envisionreports.com/ualwww.proxyvote.com. Additional copies of the 20152019 Form 10-K and this Noticenotice of Annual Meeting and proxy statement, and accompanying proxy card, may be obtained from the Corporate Secretary—United ContinentalAirlines Holdings, Inc., 233 S. Wacker Drive, Chicago, Illinois 60606.20152019 FORM 10-K FILED WITH THE SEC MAY BE OBTAINED WITHOUT CHARGE BY WRITING TO THE CORPORATE SECRETARY—UNITED CONTINENTALAIRLINES HOLDINGS, INC., 233 S. WACKER DRIVE, CHICAGO, ILLINOIS 60606. YOU CAN ALSO OBTAIN A COPY OF OUR 20152019 FORM 10-K AND OTHER PERIODIC FILINGS AT THE COMPANY'S WEBSITE AT WWW.IR.UNITED.COMIR.UNITED.COM OR FROM THE SEC'S EDGAR DATABASE ATWWW.SEC.GOV.Reconciliation ofRECONCILIATION OF GAAP to Non-GAAP Financial MeasuresTO NON-GAAP FINANCIAL MEASURESNon-GAAPnon-GAAP financial measures, including adjusted pre-tax income, adjusted pre-tax margin, adjusted net income excluding special charges.and adjusted diluted earnings per share. The Company believes that adjusting for special itemscharges is useful to investors because the special itemscharges are non-recurring items not indicative of the Company's ongoingoperating performance. PursuantThe Company believes that adjusting unrealized gains or losses on investments is useful to SEC Regulation G, the Company has included the following reconciliation of reported Non-GAAP financial measures to comparable financial measures reportedinvestors because those items may not ultimately be realized on a GAAP basis (in millions, except ratios).cash basis. The Company believes that adjusting for interest expense related to finance leases of Embraer ERJ 145 aircraft is useful to investors because of the accelerated recognition of interest.items,charges, see Note 1614—Special Charges and Unrealized (Gains) Losses on Investments to the financial statementsCombined Notes to Consolidated Financial Statements included in Part II, Item 8"Item 8. Financial Statements and Supplementary Data" in the 2019 Form 10-K. 2019 $ 3,914
171 16 59 246
(153
) (68 ) $ 3,939
$
3,914
246 (153 ) 64 $ 4,071
$
43,259
9.0
% 9.4 % 2019 $ 3,009
246 (153 ) 64 (35 ) $ 3,131
259.9
$
11.58
0.95 (0.59 ) 0.25 (0.14 ) $ 12.05 annual reportNamed Executive Officers ! ! ! ! ! ! 1b. Barney Harford 3. 1c. Michele J. Hooper The Board of Directors recommends you vote AGAINST the following proposals: 1d. Walter Isaacson 4. Stockholder Proposal Regarding Stockholder Action by Written Consent, if Properly Presented Before the Meeting ! ! ! ! ! ! ! ! ! 1e. James A. C. Kennedy 5. Stockholder Proposal Regarding a Report on Form 10-K.Lobbying Spending, if Properly Presented Before the Meeting 1f. J. Scott Kirby 1g. Oscar Munoz 6. Stockholder Proposal Regarding a Report on Global Warming-Related Lobbying Activities, if Properly Presented Before the Meeting 1h. Edward M. Philip 1i. Edward L. Shapiro NOTE: Such other business as may properly come before the meeting or any adjournment thereof. 1j. David J. Vitale 1k. James M. Whitehurst ! For address changes and/or comments, please check this box and write them on the back where indicated. Please sign exactly as your name(s) appear(s) hereon. When signing as attorney, executor, administrator, or other fiduciary, please give full title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date 2015 $ 4,219 279 4,498 1,100 (a) $ 5,598 0.4 %
$ 39,210 12,507 (b) $ 26,703 21.0 % (a)NOPAT adjustments include: adding back (net of tax shield) interest expense, the interest component of capitalized aircraft rent, and net interest on pension while removing interest tax expense.(b)Invested capital adjustments include: adding back capital aircraft rent (at 7.0X) and deferred income taxes, less advance ticket sales, frequent flyer deferred revenue, tax valuation allowance, and other non-interest bearing liabilities.Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. X 02D2WB 1 U P X + Annual Meeting Proxy/Voting Instruction Card . Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below B Please sign exactly as name(s) appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. Date (mm/dd/yyyy) — Please print date below. + A Proposals — The Board of Directors recommends a vote FOR all the nominees listed under Proposal 1, FOR Proposal 2 and FOR Proposal 3. For Against Abstain 2. Ratification of the Appointment of Ernst & Young LLP as the Company’s Independent Registered Public Accounting Firm for Fiscal Year 2016. For Against Abstain 3. Advisory Vote to Approve the Compensation of the Company’s Named Executive Officers. 01 - Carolyn Corvi 04 - Walter Isaacson 07 - Oscar Munoz 02 - Jane C. Garvey 05 - James A. C. Kennedy 08 - William R. Nuti 03 - Barnaby M. Harford 06 - Robert A. Milton 09 - Edward L. Shapiro 1. Election of Directors IMPORTANT ANNUAL MEETING INFORMATION 10 - Laurence E. Simmons 11 - David J. Vitale For Against Abstain For Against Abstain 12 - James M. Whitehurst For Against Abstain Proxy/Voting Instruction Card MMMMMMMMMMMM MMMMMMMMMMMMMMM 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000004 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 ENDORSEMENT_LINE______________ SACKPACK_____________ 1234 5678 9012 345 MMMMMMM 2 8 0 5 1 9 1 MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MMMMMMMMM C 1234567890 J N T C123456789 IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q Electronic Voting Instructions Available 24 hours a day, 7 days a week Instead of mailing your proxy or voting instructions, you may choose one of the two methods outlined below to vote your proxy or direct the trustee as to shares held in your 401(k) plan. We encourage you to vote by Internet. Internet • Log on to the Internet and go to http://www.envisionreports.com/ual. • Follow the steps outlined on the secured website. Telephone • Call toll free 1-800-652-VOTE (8683) within the United States, Canada & Puerto Rico any time on a touch tone telephone. There is NO CHARGE to you for the call. • Follow the instructions provided by the recorded message. * Proxies submitted by Internet or telephone must be received by 11:59 p.m., Central Time, on Tuesday, June 7, 2016. Voting instructions to the trustee of the United 401(k) plans must be received by 5:00 a.m., Central Time, on Monday, June 6, 2016. This Proxy is solicited on behalf of the Board of Directors.. The undersigned, having received the Notice of Annual Meeting and Proxy Statement, hereby appoints Oscar Munoz and Brett J. Hart, and each of them, as proxies with full power of substitution, for and in the name of the undersigned, to vote all shares of common stock of United Continental Holdings, Inc. owned of record by the undersigned on the matters listed on the reverse side of this proxy card and, in their discretion, on such other matters as may properly come before the 2016 Annual Meeting of Stockholders to be held at the Willis Tower, 233 S. Wacker Dr., Chicago, IL 60606 on June 8, 2016 at 9:00 a.m., Central Time, and at any adjournments or postponements thereof, unless otherwise specified herein. This proxy, when properly executed, will be voted in the manner directed. If no direction is made, this proxy will be voted FOR all the director nominees listed under Proposal 1, FOR Proposal 2 and FOR Proposal 3. In their discretion, the proxies are each authorized to vote upon other business as may properly come before the Annual Meeting. EMPLOYEES/PARTICIPANTS HOLDING SHARES IN UNITED AIRLINES 401(K) PLANS: This card constitutes your voting instructions to Evercore Trust Company, N.A. or its successor, as trustee under the United Airlines 401(k) plans. By signing on the reverse side, you are instructing the trustee to vote the shares of common stock of United Continental Holdings, Inc. held in the 401(k) plan in which you participate with regard to the matters listed on the reverse side of this proxy card and to act in its discretion upon other matters as may properly come before the Annual Meeting or any adjournments or postponements thereof, all as set forth in the Notice to Plan Participants. Your voting instructions to the trustee are confidential. If properly executed and timely received, this voting instruction card will constitute a direction to the trustee to vote on the matters as directed. In its discretion, the trustee is authorized to vote upon other business as may properly come before the Annual Meeting. If no choice is made or no timely direction is received, the trustee will vote your shares in proportion to allocated shares in such plan for which timely instructions are received, subject to applicable law. The proxies cannot vote your shares, and the trustee cannot ensure that your instructions are tabulated, unless you vote or instruct the trustee by telephone, Internet or sign and return this card. Voting instructions to the trustee from employees/participants holding shares in the 401(k) plans must be received prior to 5:00 a.m., Central Time, on Monday, June 6, 2016. Votes from all other stockholders that are submitted by Internet or telephone must be received prior to 11:59 p.m., Central Time, on Tuesday, June 7, 2016. TO BE SIGNED AND DATED ON THE REVERSE SIDE Annual Meeting Proxy/Voting Instruction Card – United Continental Holdings, Inc. C Non-Voting Items Change of Address — Please print new address below. IF VOTING BY MAIL, YOU MUST COMPLETE SECTIONS A - C ON BOTH SIDES OF THIS CARD. + + Admission Ticket 2016 Annual Meeting of Stockholders of United Continental Holdings, Inc. Wednesday, June 8, 2016 9:00 a.m., Central Time Willis Tower 233 S. Wacker Dr. Chicago, IL 60606 Doors will open for registration and admittance at 8:30 a.m., Central Time. Upon arrival, you must present this admission ticket and valid picture identification at the registration desk to be admitted to the Annual Meeting. * The Proxy Statement and 2015 Annual Report are available at http://www.envisionreports.com/ual. qIF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.q