The Detroit News reports that Delphi has asked the U.S. Bankruptcy Court for permission to pay its top executives more than $215.5m in bonuses and incentives for 2008. Now that the autoparts maker is almost out of Chapter 11, they're looking to shell-out bonuses to 560 executives: $78m in one-time bonuses, $11.5m "one-time supplemental grants" to "compensate for changes in the new executive retirement program," $46m from a "short-term incentive program," and $80m from a "long-term incentive program." Some of the payments will be in cash and some will be in stock. Proponents of the bonuses say hey, c'mon, cut us some slack. The payouts are on par with the goodies on offer at Visteon, DuPont, Coca-Cola, Goodyear Tire, Best Buy and Pepsico– none of which, incidentally, are in bankruptcy. Shareholders and workers who had to bear the brunt of Delphi's losses are less than pleased, to say the least. Will the federal judge reward Delphi's execs for almost killing their company resurrecting the company's fortunes? Watch this space.
Find Reviews by Make:
Read all comments
and people wonder why Detroit is in such a mess? It this kind of overcompensation which causes a massive drain on other departments’ budgets (i.e R and D, engineering etc) and, thus, causes lack of competitiveness.
I mean $215.5 million! For a managment which got them into bankruptcy?!
Mr Ghosn had the right attitude with his managment team, when they missed a sales target.
“We missed a sales target? Forget about your bonuses!”
This is why unions like the UAW are born. If this is the system that exists in the United States, then why shouldn’t they be allowed to a share of the pie?
Newsflash: I read, oh, maybe a decade ago, that the Japanese executive makes about seven times the amount of their factory workers.
How much more is the paycheck for a US executive compared to the guy/gal down on the (few remaining) plant floor, doing the actual work of earning the company profits (one hopes)?
I recall reading it was something like 114 to 1.
Gee, given the “results” of the Japanese companies (profitable, generally) and many US companies (not profitable/bankrupted/exporting jobs left right and center) I have to start wondering….
gee, do ya think American executives MIGHT be a “tad” overpaid? Hmmmm?
I would agree the execs who helped get a fledging company through bankruptcy and stayed the course should get a slight bonus – but not ones on par with very profitable / successful companies. You’d figure that one who runs the company should be tied to its performance. That creates incentives to do a better job. This is bass ackwards – ironically why they are in bankruptcy in the first place.
Let’s say a big company has 700 executives making 20x the salary of the people on the floor doing the actual work. When layoff time comes around, these brilliant geniuses determine that they have to lay off 2,000 employees to save money. I’m certain it never comes up for a second that they could make the same savings by laying off 100 overpaid do-nothing meeting-attending golfaholic executives. Crap in a hat, stuff like this makes me hate everything.
The I’ve got mine, ____ you attitude which so many people get away with will be the undoing of the American experiment if something doesn’t change course.
I hope no judge will agree to anything like that, but they wouldn’t ask if they didn’t think it could happen.
Perspective from a Delphi employee:
I agree that executive bonuses are extremely high. However, from a competitive salary standpoint, the Delphi bonuses are not out of line. The entire purpose of the bonuses was to retain people key to navigating the company through the reorganization opportunity provided by the bankruptcy filing. A lot of good salary & executive people were jumping ship when the bankruptcy commenced…most were concerned about job security. The bonuses are a way of saying “Be loyal to us and you will be rewarded.”
I am just a salary engineer, but I have reaped the benefits of the bonuses as well. Most, if not all of the salary/executive employess at Delphi are focused on reducing costs and increasing revenue as this now directly affects our pay. Before bankruptcy, there were no bonuses, no focus, and little dedication. The morale of the company has turned.
From my point of view, Steve Miller and the new management structure has done an excellent job achieving what was outlined in the bankruptcy…mainly get to a competitive cost structure via labor cost reductions and shedding unprofitable business units. They should be rewarded for their efforts.
As for the UAW workers who left Delphi, they did not leave empty-handed. All the workers who left were offered big separation packages or buydowns if they decided to continue working. How often do you hear of a company in bankruptcy paying workers to quit or retire? Granted, GM funded alot of it, but Delphi at least made sure their workers were compensated.
Hmmmm, it is hard not to see this as outrageous and shameless cheek. I try hard not to just get sucked into a knee-jerk reaction to these huge numbers ( as someone who earns a more real-worldly figure ). I try to rationalize the fact that top executives salaries must be market-competitive to stop them jumping ship – but, no sorry it doesn’t wash with me.
There are several points I just can’t get past –
I accept the argument that a high-level executive makes decisions that may gain the company millions or maybe billions of dollars in extra profit and therefore can potentially add value way in excess of the salary that they draw …… but these particular executives have led the company into bankruptcy and have by definition added NOTHING to the value of the company. Surely “bonuses” should be performance related? If the company is losing money then there should be no bonus? isn’t that common sense? How do they look themselves in the eye in the mirror and sincerely say “no, I really do deserve this money”. I guess they don’t. Moral scruples don’t appear to be a prerequisite of corporate management much these days.
How much money does an executive need to live a VERY comfortable lifestyle? I realize that there is much in the truism that “the more money you have the more you tend to spend” but where does it end. I can only see greed and overblown egos (bragging rights) driving the need for these enormous amounts of money?
How can these executives justify paying themselves this extra money when they are expecting the bulk of the workforce to make concessions on pay? Without getting too deeply into the moral/philosophical issue of what is right and fair (because that is a very subjective issue) but from a purely practical point of view can’t they see that this just perpetuates the “us-and-them” culture which is so damaging to the auto industry? Once again, I suspect that these executives simply don’t care about that as long as they get theirs….
In theory I believe that board of directors is supposed to keep a control on executive pay? In reality this never seems to work. Is this surprising? No not really. What sort of people make up the board? – the same class of executives and ex-executives as the ones getting the pay award. They are effectively approving huge pay awards to people just like themselves so why hold back? The foxes are in charge of the henhouse. Why do they pay themselves such astounding figures – er, because they can.
It also strikes me that the huge executive pay deals are another visible symptom of short-termism in corporate America. When an executive hits the top they feel that they should make hay while the sun shines because they will likely not stay with that company. This can often be seen in cynical decision making that might make the company look more profitable for a year or so (maybe drive the stock price up an make those juicy options more valuable?) but will damage the company in the long run? Why should that executive care – they’ll take their pile of cash and disappear – leaving the next poor sucker with a legacy of failure for the future. There are so many instances of this in the auto industry and often discussed on this site – but just think about failing to invest R&D dollars in the 90s while cashing in on the SUV craze if you need a good example. I’m not sure what the answer to this problem would be? Turning the clock back to the days when people often spent their whole career as a company man with just one company isn’t likely to happen either?
@1996MEdition:
from a competitive salary standpoint, the Delphi bonuses are not out of line
Are those competitors in bankruptcy?
Most, if not all of the salary/executive employess at Delphi are focused on reducing costs and increasing revenue as this now directly affects our pay.
Shouldn’t this be what management and employees try to do anyway?
The moral of the company has turned.
Perhaps a freudian slip on a news article that wants to enormously compensate executive employees?
Good ole crony capitalism!
I particularly like the way they spin this kind of behavior. When they cut lower-ranking employment or pay, it equals cost-cutting. When they give the upper echelons a fat raise, it equals improving morale and retaining quality staff.
They can only do this because it’s in the interest of the board to take care of its own.
What the hell is wrong with these people??? I mean are there really multi million dollar contracts awaiting these guys at other companies? Are there not slightly lower level execs throughout the country able to do their jobs better and for much less? This problem exists because shareholders let it. Execs are out of control. Not only do they grant themselves baseless pay raises and bonuses, but they also seem to continuously multiply even during downsizing. How many people are in charge of North American operations of Chrysler right now? There is nothing worse to the performance of a company than a new exec. They add layers and layers of beurocracy just to justify their existence. It is time for shareholders to demand change!!!
The top exec’s (Battenberg, etc.) that ran the company to bankruptcy are gone. It’s a new game at Delphi.
What would happen if Delphi brought slashed all executive salaries by 50%, brought back all the UAW at $28/hour plus benefits, and kept all the unprofitable plants open? The answer…Chapter 7.
I’d first like them to pay me for the Delphi stock losses I, and many other employees incurred due to thier criminal negilgence and malfeasance. BTW, Many of those execs are still there. Sure, I’ll wait.
Investing in stock is risky. There is a class action settlement for those who lost money due to the “criminal negligence and malfeasance”.
BTW – None of the execs have been found guilty of malfeasance in the courts.
Innocent until proven guilty, last I heard.
I lost no money in Delphi, but agree that a company emerging from bankruptcy comparing itself to industry leading profitable companies to justify large bonus payouts to executives is the definition of chutzpah.
Delphi execs – you can get those bonuses when you turn a profit, and more importantly, don’t have to go hat in hand to a bankruptcy court and ask for permission to pay bonuses.
This is a good example of greed and temerity going hand in hand.