Ual: Labor Is My Co Pilot

It may not be exactly what management had in mind, but a new performance-based pay system at United Airlines Inc. ended up giving the carrier a critical edge during recent stormy times in the industry: labor peace. Starting in 2000, part of the compensation for top UAL executives will be tied to worker satisfaction as measured by an outside survey firm. The proposal is being adopted at the insistence of UAL's unions, which own 60% of UAL shares. Indeed, UAL is approving the plan even as rival American Airlines tallies the cost--approximately $150 million--of its latest labor dustup, a pilot sick-out over wage issues that scrubbed hundreds of flights over the Presidents' Day holiday.

Not surprisingly, CEO Gerald Greenwald and other execs didn't leap at letting workers set their pay. "They outright rejected it," recalls International Assn. of Machinists President R. Thomas Buffenbarger, who says the union presented it to management last year. After that, the IAM drafted a shareholder resolution, which would be guaranteed to pass, given the union's shareholder votes. That's when management caved, union leaders say. "It shows employee ownership means something," says Buffenbarger. The company disputes that version, saying that it long planned such a change, but moved faster because of the IAM proposal.