TTAC has highlighted the inherent obscenity of GM CEO Rick Wagoner’s compensation for flying the artist formerly known as the world’s largest automaker straight into the ground. While Wagoner inherited enormous structural problems from his predecessors, he has done nothing to correct them. Throughout his administration he’s shown a startling lack of courage and foresight, no product savvy whatsoever and an abject inability to face-up to the reality of GM’s peril. And yet he has drawn down over $100m in direct compensation since his installation at the top of the GM pyramid. This reporter (that’s me) was widely and loudly ridiculed when he cried foul at Wagoner’s bankruptcy-proof pension (and for asking if GM Car Czar Bob Lutz enjoyed same). Lest we forget, Wagoner’s compensation was INCREASED (a.k.a. “restored”) in April to $14.4m per year (and the rest). That’s more than all top ten of Toyota executives combined. Make of that what you will, but how can The New York Times report GM’s cutbacks in white collar retirees’ health care without putting their sacrifice (small as it may be) into its proper context? Surely, it’s time someone asked the question: why is Wagoner still getting paid?
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This type of issue is found in most major companies in any county. You have upper management making huge sums of cash and then asking those who are living check to check to give up some pay and benefits. Becoming a CEO, CFO, President, VP,etc, of a major company is like winning the lottery. I believe in the free market economy, but one flaw is the abuse by upper managers of the lower level workers. When things are good, lower level workers are told to be happy you have a job or here is a couple of extra dollars. Meanwhile upper managers are taking in six figure bonus checks and when they get fired they get a big pile of cash. Greed unchecked is what has killed the middle class in the United States and other parts of the world.
It’s a–sob–heart-rending article. Oh, the humanity!
FTA: “I just hope they can recover and come back,” said Kenneth Shear Jr., 70, a former plant supervisor who retired in 1992 and now lives in Summerfield, Fla., in a community with a handful of other G.M. retirees. Mr. Shear was billed $52 to get a pacemaker several years ago, a $148,000 procedure, and never had to pay a health care bill in 31 years at G.M.
“Some of these people have been on G.M.’s plan for 40 or 50 years, and now all of this is thrown at them,” said Jack Dickinson, a G.M. retiree who runs the Web site OverTheHillCarPeople.com. “People are highly upset, confused and totally lost. The Medicare system is very hard for older people to tackle.”
Eliminating that confusion has been a major undertaking. G.M. scheduled 150 informational meetings in cities where its retirees are concentrated and hired a company called Extend Health to answer questions and help with Medicare enrollment. A company in Tennessee, My Part D USA, which provides personalized comparisons of different plans, has met with groups of G.M. retirees and is working with OverTheHillCarPeople.com to ease the transition.
“These people have never had to deal with Medicare at all,” said Karyn Blake of My Part D USA, a Detroit-area native whose uncles owned Cadillac and Oldsmobile dealerships. “They’re hearing different things from different salespeople, and they’re totally overwhelmed. I think they kind of feel abandoned.”
“To help retirees pay for their new [supplement to Medicare] coverage, G.M. is raising monthly pension payments by $300, which typically means $240 or $255 after taxes.”
I don’t get that hung-up on executive compensation. For the most part, the terms of the salary and bonus opportunities are set at the time of hiring and so the executive’s performance is expected to be good. Should there be some kind of clause that allows for the return of earnings should the business go south? Maybe, but ask your-self this question while you consider your answer: would you ever agree to something like that?
Also, what’s $100M to run such large company? If he was successful no one would be crying foul. If one is upset about his compensation in terms of the company’s performance then call for his firing. He earned his money within the terms set by the Board of Directors. He’s lucky for having done so little work for so much money. I don’t hold it against him…
The Board of Directors, however, are criminally negligent, IMO. I’d be preparing my class-action lawsuit if I were a shareholder.
We have to realize that the overly greedy wealthy protect the overly greedy wealthy and everyone else is a 2nd class to them.
It’ll be interesting to see, after the shake-out and dust-settling, how executive salaries are affected.
And I agree, even though this current crop have proven themselves to be greedy, worthless, bastards who aren’t worthy to tie Iacocca’s wing tips, it’s the boards of directors who are really to blame and who should be held to account.
You understand of course that the BOD is composed mostly of other top executives from other large corps. When they leave the BOD meeting and return to their jobs as Corp CEOs and CFOs they expect to have their BODs write them the same sweet package they just wrote for their buddy CEO while wearing the Director hat.
Don’t know if there is an answer to all of this.
Compensation panels only look at US corps for comparison. Perhaps they should be required to also look at equally large and possibley more successful foreign corps where CEO compensation may be 10% of that received by US CEO.
We are after all a “global economy”.
You know, that $100 million paid to the CEO can pay for a lot of heart procedures.
Let’s take it a step beyond limiting pay: I want some of the money back. Say about $90 million of it. $1 million a year for destroying what used to be the largest industrial company in the world is more than enough pay for a CEO.
To say it’s not much money to a large corporation is to not understand the basics of leadership; you can’t ask people to willing go where you would not. The last time the government bailed out an American car company the CEO took a salary of $1.00, so obviously some people, principled talented leaders, have agree to pay for performance.
If I were a union member being asked by a guy making $14m/year to accept concession for the health of the company, I’d say show me what you mean. I’d refuse unless they at least pegged their salary to a multiple of mine.
# jaje :
November 10th, 2008 at 1:54 pm
We have to realize that the overly greedy wealthy protect the overly greedy wealthy and everyone else is a 2nd class to them.
Most of the wealthy people that I’ve known give huge sums to philanthropic causes.
Who is greedier, someone who pays 60% of their income as taxes (when you add up fed, state, fica, medicare and property taxes), or someone who pays no taxes and lives off of others’ productivity?
@ Bozoer Rebbe:
I know you were responding to a broad brushstroke that painted all rich people with the same brush, but in GM’s case, it indeed has been lead by greedy individuals who cared much more for the needs of shareholders (but really just themselves) rather than all of the stakeholders.
Boz, in what respect does Rick Wagoner not fall into the second category you described? You saw the posting. Wagoner’s making more than the top 10 guys at Toyota, GM’s #1 competitor that is currently everything GM is not.
There is in fact a crisis of leadership in this country. Personally, I blame the Ivy League. These schools tend to pick the very top kids in their applicant pools, but once they’re in they do whatever it takes to get them graduated and into positions of authority. That’s how they end up “donating” so much money back to their schools. To me that’s not philanthropy, its racketeering.
Anybody familiar with college sports probably knows something about recruiting. Imagine if schools who recruited the best high school players guaranteed starting positions to them regardless of their on field performance? That is essentially what’s happening in schools like Harvard Business School, of which Red Ink Rick is an alum.
“To say it’s not much money to a large corporation is to not understand the basics of leadership” -Gunit
Red Ink Rick is not leading the troops up the beach at Normandy here. He doesn’t need to take only $1M salary since that would really show the employees he’s just a man not an emperor. No factory worker thinks $1M is a small salary. Leadership in a 240,000 employee organization is not about relating on a personal level, it’s about leading on an ethical level which, I believe does not necessarily extend to multi-million dollar salaries. Of course, this is all based on the fact that GM is company that moves product measured in the dozen’s of billions. This is an enormous company.
Regarding BOD and MBA’s, you’re really drawing the wrong conclusions here: An MBA does not make a person unethical. Being on a BOD does not make a person unethical. Being an unethical person does.
For every example of unethical action (or inaction) present in the GM/Enron/Baer Sterns/[insert failed company here] there are dozens of counter example where the system of checks and balances has resulted in a better product for customers and greater value for shareholders.
I am reading On a Clear Day You Can See General Motors by John DeLorean. The culture of GM, the system of “unobvious choice” promotions and indebted servant relationships has existed since the 60’s and is responsible for the problems GM faces today. This culture was not borne out of b-school relationships, but instead out of the cult of power that exists in the relationship between a boss and his direct reports. This type of relationship rolls downhill and is self-sustaining over time.
It also seems to have extended to the BOD, in the case of GM. This too close relationship between Executives and the BOD has been highlighted by RF on many occasions.
Executive compensation doesn’t seem to bother many people. In fact I bet there has been many more comments by people railing against the Detroit worker compensation structures than against the executive pay in Detroit (and elsewhere). And many people continuously accuse the unions that they have ruined Detroit. Product ruined and continues to ruin Detroit, union contracts just add to the costs and now losses but their resposnsibility is minimal since they have no say or power over the product other than how it’s put together. Sure it would help a bit of they screwed the cars better but if the car is poorly designed no amount “screwing” it will make a piss-poor product a winner.
The problem with executive compensation now is that it’s starting to bring down the whole system. When executive failure is rewarded in broad spectrums of the economy from manufacturing to banking it turns the system on its head for a short while until it comes crashing down.
Beyond that, ancient historians already noted that nothing is more corrosive to a country’s social fabric than enormous differences in wealth and now increasingly undeserved wealth.
It’s always easier to blame the unions. After all, when was the last time you saw a CEO go on strike?
This seems to be a general GM comp problem.
How does the ridiculous compensation of Richy Rick compare to the wage/benefits multiple that UAW workers enjoy over the larger labor pool of similar skills?
Hmmm. This one may be difficult to determine since one must establish a peer group for RR. Dancing Circus Bears seem the likely choice, but the sample size may be too small to be statistically significant?
GM GOT RICK ROLLED !!!.