A shareholder of US Airways Group Inc. has sued its board of directors, seeking to overturn a deal to award $45 million in severance benefits to the airline's top three executives in the event of their resignations, according to the Washington Post.
The provision has been part of the airline's plan to merge with United Airlines, a merger that ultimately failed. But shareholder approval of the $12.3 billion deal triggered the executives' right to quit and receive the benefits up to 30 days after the first anniversary of the vote.
That's according to a lawsuit filed in Delaware Chancery Court by shareholder Steven Rosenberg, who calls the severance package "unconscionable" and "grossly imprudent and injurious" to the airline.
The one-year anniversary of the vote arrives Oct. 12, the Post reports.
The money would be divided among US Airways Chairman Steven M. Wolf, chief executive Rakesh Gangwal, and General Counsel Lawrence Nagin. The deal only encourages the three executives to resign, Rosenberg alleges in the suit.
According to the court papers, Wolf would receive about $16 million, Gangwal about $21 million and Nagin about $8 million. The money amounts to about three times each executive's salary and bonus, the suit says.
"The company is strapped for cash to such a degree that the company is embarking upon a massive restructuring, so the potential payout to the executives is particularly burdensome," Rosenberg says.
US Airways, the nation's No. 6 airline, lost about $195 million during the first six months of the year and is expected to lose more than $160 million in its third quarter, according to the Post.
The merger with United Airlines was abandoned after the Justice Department said the deal would be anti-competitive.
US Airways declined comment on the lawsuit.
Wall Street analyst Glenn Engel told the Post that more such lawsuits could be filed, mainly because the airline's shares have fallen about 65 percent since last August.
But Engel added that he doesn't expect such challenges to be successful as long as US Airways' directors can prove that they had "sound business reasons" for offering the packages. One of those reasons could be that US Airways' previous senior executives - including former chairman Seth Schofield - had similar packages before Wolf's 1996 arrival.
US Airways shareholder William Lauer of Allegheny Capital Management said he doesn't agree with suing the airline's directors. But he said he hoped the board would consider deferring the severance package so that the leadership would not be motivated to leave, which would force the Arlington-based carrier to scramble to find another executive team.
