United Airlines chief Jeff Smisek has taken more than his fair share of criticism from disgruntled flyers, unhappy investors, and alienated workers. The piling on continues this week with a letter from consumer advocate Ralph Nader, taking Smisek to task for United’s outsourcing of union jobs and for using profits to buy back shares instead of investing in the company.
The criticisms are very much of a piece with complaints about United’s management practices coming from other groups.
Nader suggests that stock buybacks are a self-serving tool to enrich top managers: “Stock buybacks—really a poor use of productive capital—are favored by executive suites as a way to elevate executive compensation compared to cash dividends.”
He knocks the jobs outsourcing for being miserly and for its corrosive effects on customer service. And, more generally, he calls out Smisek’s narrow focus on cutting rather than building: “Squeezing appears to be your corporate policy tool for your passengers as well—for example squeezing their leg room, squeezing them by innumerable fees and penalties and squeezing their time by delays on the phone in responding to their questions.”
Nader, famous for his damning critique of Chevy’s Corvair, “Unsafe at Any Speed,” and infamous for splitting the Democratic vote in the 2000 election, giving George W. Bush the edge over Al Gore, stops short of calling for Smisek to resign, as some have done. But his open letter to Smisek, published in the Eurasia Review, does contain a threat of sorts:
Consider this advice: drop the risky outsourcing; treat your employees as Southwest does; and stop ratcheting up the fees for baggage, changes of reservations, etc. Unless, that is, you believe that customer backlash, investigations by media and lawmakers and lower job gratification are not anywhere on your horizon.
If anything, Nader is perhaps underplaying the scope and intensity of Smisek’s critics. The backlash, media scrutiny, and worker disengagement that he warns may be in the future and already very much part of Smisek’s present.
Reader Reality Check
Does Smisek have a future with United?
This article originally appeared on FrequentFlier.com.
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