Southwest Airlines outlined a compensation plan for new CEO Bob Jordan that could earn him about $9 million in salary, bonus potential and limited stocks, according to regulatory documents on Monday.
Jordan, who took over from outgoing CEO Gary Kelly on Feb. 1, received a base salary increase from $185,000 to $700,000 and more than doubled his short-term bonus target to $1.4 million by 2022.
Southwest said the company’s board of directors and its compensation committee had not previously set Jordan’s salary and compensation. Along with potential salary and bonus increases, the board gave him $5.9 million stock awards and performance goals that he could pay out in full in three years.
Stock incentives and bonuses are common for new CEOs as the board of directors seeks to establish a rewards program that will reward executives for meeting both short and long-term financial goals. Stock prices encourage executives to focus on keeping the stock price up, while other airline incentives focus on metrics such as revenue and customer ratings.
In his previous role as executive vice president of corporate service, Jordan earned approximately $3.2 million in total compensation in 2020, the most recent data available, according to investor documents.
Jordan’s predecessor, Kelly, earned about $9.2 million in total compensation in 2020, but that number is likely to drop when the 2021 data comes out due to restrictions on CEO compensation by the three government incentive programs.
Southwest made a profit of $977 million in 2021, including $230 million that went to employee profit-sharing programs. But due to the continued impediment to travel caused by the COVID-19 pandemic, Southwest Airlines would have lost nearly $1.3 billion were it not for the $2.7 in government payroll support that accounts for about half of the economy. year covered the most salaries and benefits for employees.
Southwest has received approximately $3.7 billion in salary support from the government through its three incentive programs in 2020 and 2021. That aid also meant restrictions on how much executives like Jordan and Kelly can earn, which will almost certainly lower compensation for the past year. †
But because of the way the compensation is structured for Jordan and other newly hired executives, most of those stock and performance awards won’t be available until at least next year. Restrictions on airline executive compensation expire on October 1.
Even after bonuses and stock potential are taken into account, Jordan will earn less than the CEOs of other major airlines. American Airlines’ retiring CEO Doug Parker earned total compensation in 2020 of $10.66 million, United’s Scott Kirby $16.7 million and Delta’s Ed Bastian $13.1 million.