Air Miles top executive cashes in while collectors fume

While Air Miles collectors struggled to redeem their Dream Miles last year, the company's top executive raked in $2.7 million US in cash and compensation. That's more than $3.6-million Canadian loonies, and it's raising eyebrows.

"Wow I don't think this will resonate well with collectors," said loyalty card expert Patrick Sojka. "Knowing the hell Air Miles put them through last year and him making this much money."

Bryan Pearson, the president and CEO of Air Miles owner LoyaltyOne, was paid the compensation package despite the chaos and missteps surrounding the planned five-year expiry of its miles.

Throughout 2016, many collectors had difficulty redeeming their Dream Miles, finding desirable "rewards," booking trips and flights and long waits contacting customer service. After the Ontario government moved to outlaw the expiry of loyalty points, the company abruptly cancelled its unpopular expiry plan in December, a measure that it warned could cost it up to $240 million US. Since then, it has experienced other problems including an alleged theft of Cash Miles and complaints about devaluations of its miles.

• Watch the Marketplace episode The people vs. Air Miles

"You gotta be kidding me That's insane!" said long-time Air Miles collector Michael Judd, who spent almost a year trying to find and book a flight to New Zealand.

"How can a man retain his job and make so very much when his performance and representation of the company is so poor?"

Here's what Pearson earned in 2016

According to documents filed with the U.S. Securities and Exchange Commission (SEC) last month, in 2016 Pearson earned:

• A salary of$459,895.
• Stock options valued at $1.7 million.
• Incentive plan payment of $377,714.
• Pension account earnings of $33,698.
• "Other compensation" of $157,808, including $9,682 for a retirement savings plan; $91,978to cover medical, dental and wellness insurance and "required employee health tax."Pearson also received $1,884in "company subsidized parking" and $3,968for "personal use of a country club membership."

"Oh, that's crazy,"said an irate Joanne Moscone, of Sarnia, Ont. Once an elite Air Miles collector, Moscone cut up her card last autumn and has stopped shopping at Air Miles retail partners, known as sponsors. Moscone used to redeem thousands of Dream Miles on travel vouchers which she could use at her local travel agency to book travel, until Air Miles took those rewards away from Dream Miles collectors.

"Look at the ones [collectors] who couldn't even get anything. And he's walking away with that amount of money."

"It's just like the whole Bombardier [compensation] issue. It doesn't look good to the public,"said Sojka, who added that Pearson also oversees other loyalty andconsulting programs, in addition to Air Miles.However, the Air Miles program is the biggest moneymaker for LoyaltyOne, which reported revenue of $1.3 billionlast year.

"So, his [Pearson's] entire compensation value isn't just based on the Air Miles program. But the consumer won't care about that. They care that they lost value in the program by redeeming for things they didn't want, wasted time on the phone, etc. and will think that Air Miles said they have to expire miles as a way to make money," said Sojka."Well, why not lower executive compensation instead."

Company defends his earnings

In 2016, Pearson also earned another$1.3 millionby selling more than 8,000 of his sharesin Texas-based Alliance Data Systems, the holding company that owns Loyalty One andAir Miles and of which Pearson is an executive vice-president. But according to company documents, he lost out on a cash bonus,as the board of directors apparently determined it was not warranted.

The company would not comment on Pearson's pay package in detail, but said that it is "in accordance with industry practices and in strict compliance of the securities regulations in the United States and Canada" and that it was strongly endorsed with a 98.8 per cent approval by shareholders.

It also said that Pearson is a "highly regarded expert on enterprise loyalty, retail marketing, coalition marketing and customer relationship management."Pearson began his career at Air Miles in 1992 "soon after its founding," and became president of Air Miles in 1999 and president andCEO of LoyaltyOne Co. in 2006 according to a company statement. LoyaltyOne declined an interview with Pearson, saying that he was "unavailable for an interview."

Pearson's 2016 earnings are actually the lowest in the five years since the announcement of the expiry policy. In total, from 2012 to 2016, Pearson's executive compensation amounted to $15.8 millionaccording to documents filed with the SEC.This does not include millions in stock sales.

"Holy Jesus! And you know what, I'm struggling to make ends meet," said Air Miles collector Michael Judd of Oakville, Ont."If he was doing well for everybody, I'm game for that. But he's not.

"I do not in any way, shape or form see Mr. Pearson's compensation in alignment with his contribution to his company. The errors and outright blunders made under his watch have harmed his company and the industry as a whole."

Collector Moscone wants to see Air Miles retail sponsors flex their muscles and "rein him in" because without the sponsors, he's got no program."

Expiry policy triggered unwanted rewards

The Air Milesfive-year expiry policy for miles was announced in a news release at the end of 2011 with a date set for Dec. 31, 2016, but the policy was never heavily publicized by the company and caught many collectors by surprise. When collectors attempted to redeem, they faced problems including the inability to find satisfactory rewards, no access to attractive cash rewards like gift cards, and long waits to reach customer service by phone. Worried about losing their Dream Miles, many collectors traded their Dream Miles for "rewards" they did not particularly want or need.

CBC Marketplace revealed that the company had an "ultimate redemption rate" of 72 per centand used "levers" to "control" the number of miles redeemed by collectors.According to the quarterly report filed earlier this month, Air Miles executives are now calculating that 78 per centof miles will be redeemed in 2017.

So far this year, Pearson has made $853,243 by selling more of his shares in parent company Alliance Data Systems.The company's annual general meeting will take place on June 7.