Apr 27, 2009 4:03 pm US/Central
New Committee To Review DFW Execs' Salaries
Reporting
Jack Fink
DFW AIRPORT (CBS 11 / TXA 21) ―
Like many people, business traveler Steve Lorenz has grounded some of his business trips to save money during the recession. "I would say I've cut back 25 percent. I don't see the lines I saw one year, two years ago. Ithink a lot of people are doing the same thing," he noted.
But not everybody.
Our investigation found for the past three years, the amount of passengers, flights, and cargo -- all sources of revenue for DFW Airport -- have dropped.
Yet during the same time period, salaries and benefits for DFW's executives have gone up.
It begins at the top.
CEO Jeff Fegan's base salary is $378,000.
The airport contributes another $22,000 to his retirement account annually. That lump sum is not a match. The lump sum payment is part of his total compensation -- more than $400,000 this year.
Fegan justifies his salary by pointing to the airport's relatively low cost of operations and numerous consumer and industry awards. Fegan said, "I feel like I'm well paid, and I appreciate their support and compensation, and again I think the airport has had tremendous results in terms of customer satisfaction, in terms of cargo, in terms of passengers."
DFW is jointly owned by the cities of Dallas and Fort Worth. So we talked to Dallas Deputy Mayor Pro-Tem Dwaine Caraway, who says Fegan's salary caught him off guard. "It's a little surprising that you can make those type of dollars at DFW airport," Caraway said. "He has a great responsibility, but at the same token, it begs for some type of review."
And review we did. And here's what we found: Fegan makes more than those who run airports with more flights and bigger operations than DFW. Chicago O'Hare's boss makes $179,000. The person who oversees all three of New York's major airports makes $240,000. The head of Atlanta's Hartsfield-Jackson makes nearly $286,000. And the head of LAX, in Los Angeles, makes $326,000--and she also runs three other airports.
Fegan is the highest paid airport executive in the country. He said, "DFW Airport has always had a history of compensating for talent."
Board members appointed by the cities of Dallas and Fort Worth, including Betty Culbreath, say Fegan has been an excellent CEO since he got the job in 1994. Culbreath said, "Frankly, I think Jeff is entitled to his salary, based on his tenure. I just don't think it's out of line."
When we told Culbreath that he's the top-paid airport executive in the country, she replied, "That's because he's the best."
But Fegan's salary is not the only one we examined. His executive vice-presidents, all earn between $230,000 and $300,000 in total compensation.
And Fegan, not the airport's board, approves their compensation.
Their salaries are not only much higher than those of most of their counterparts nationwide, they're higher than those who run most of the airports. Fegan said, "I think we have a better team than anybody out there."
When you add it all up, between fiscal years 2005 and 2009, DFW's top six executives combined made $900,000 extra in car allowance, longevity pay, retirement contributions, excellence reward bonuses and other payments.
Last fall, after a series of CBS 11 reports, the airport board voted to phase out longevity pay and change auto allowances for top executives into auto leases. In all, DFW airport pays more than 100 staffers more than $100,000 a year. That's more than any other airport in the country.
We showed the salary comparisons to Dr. Mel Fugate, a management and leadership consultant and a professor at SMU's Cox School of Business. Fugate said, "That begs the question: what is different? What is special or different about this particular market in this particular industry that warrants the higher pay?"
We asked Fegan if other airports are paying their chief executives less, why shouldn't DFW? "I think you have to look at every airport's situation," he said. "Every airport is different; they have a different governing structure. They have different reasons why they compensate people at various levels. It's an apples-to-oranges comparison."
We asked the chairman of the DFW International Airport Board, Ben Muro, if the executives' jobs could be done for less. Muro said, "I don't think so. We recruit most of our people from corporate America. We don't necessarily recruit people from other airports."
When asked why not, Muro answered, "Because we run this airport as an enterprise… as a business and we want to get the best people we can to run this airport."
Another board member, Fort Worth Mayor Mike Moncrief, agrees. "You get what you pay for," Moncrief said. "You're not going to attract qualified people if you don't pay them appropriately."
Unlike DFW, which is run independently from its owner cities, most other airports are owned and operated by the cities they're in.
The Airports Council International, an industry trade group that received nearly $200,000 in dues and other payments from DFW this year, says Fegan's salary is justified.
The group's executive director, Greg Principato, says "In Chicago, I'd point out it's part of the city government, and so everyone in Chicago makes whatever the mayor makes minus some figure... So you have an artificial cap there. Atlanta is also part of the city structure."
But other industry experts say while DFW has differences with other airports, its core business is the same.
And Fugate says when comparing salaries and compensation, "The most valid comparison is to people doing the same job in the same industry."
So what's being done about it? Dallas Mayor Tom Leppert, also a member of the airport's board, has now requested more board oversight of the executives' salaries here. Even though the board members have approved Fegan's salary every year, now, for the first time ever, the board has set up a compensation committee to review how much the higher-ups make.
"That committee will go through a variety of issues," Leppert said. "Not only salaries, but benefits and those sorts of things. Clearly,we didn't have a compensation committee, so that probably aggravated the situation."
We asked Leppert if the salaries of Fegan and his executive vice-presidents are justified. Leppert told us, "What we'll do is look at it analytically and see where it should be. We want to have the best people. We want to pay them, but it's going to have to fall within the market constraints and what the market parameters are."
The board's new standing committee on compensation will not only review Fegan's salary more closely, Leppert said, "But also those who are reporting to him several layers down."
Moncrief says, "I feel confident as one of the two owner cities that we are providing responsible oversight."
As the recession has dragged on, the airport froze its 2009 budget and is in the process of cutting an additional $20 million. But the chairman of the airport board, Ben Muro, says layoffs and salary cuts are not on the table. "We're not going to cut anyone's pay," he said. "It would be a matter of last resort. When you're running a world-class operation and you're getting kind of results that we're getting here,the last thing we want do is to start losing people."
Fegan says he supports the addition of a board compensation committee.
The committee hasn't met yet, but has market studies underway.
DFW is American Airlines' home airport, and it has major operations at several other airports across the United States. We asked American about operating costs at other airports. In an email, American spokesman Tim Smith said that DFW has lower costs than many other airports, including some that are smaller than DFW.
Accodring to Smith, among hubs that have higher costs than DFW are Denver International, which is a hub for United Airlines; Houston Intercontinental, which is a hub for Continental Airlines; and Chicago O'Hare, which is a hub for both American and United.
Hubs that Smith called "much higher" include the three New York City airports and Miami, which is another American hub.
Smith says hubs with lower costs than DFW include Atlanta, which is a hub for Delta; Charlotte, a US Airways hub; and Minneapolis-St. Paul, which is another Delta hub.
Additional information about this story:
If you'd like to share your opinion of this story with DFW Airport's administrators and board members, here's how:
Contact the airport's administrators at 972.574.6000 or AirportInfoCenter@dfwairport.com.
The mayors of both Dallas and Fort Worth are on the airport's board of directors.
You can reach Dallas Mayor Tom Leppert at 214.670.4054, or you can email him via a form on the City of Dallas' website.
You can contact Fort Worth Mayor Mike Moncrief at 817.392.6118 or mike.moncrief@fortworthgov.org.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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