It’s been over ten days since GM’s Bob Lutz took to the local papers to complain that GM’s executives are “way, way, way underpaid,” and its still been less than a week since Ed Whitacre’s $9m compensation package was announced but politicians are only now starting to sit up and take notice. Barney Frank (D-MA) can usually be counted on to give greedy CEOs a good dressing-down, but at this point, Mama Frank seems to have given up on the government-owned automaker’s execs. The Detroit News reports Frank’s mild disappointment thusly:
“I don’t think Mr. Whitacre was going to go do something else” if he got paid less, Frank told reporters this afternoon after a hearing. “He’s having a good time there. I think they way overcompensate themselves.”
Special master for executive compensation Ken Feinberg chimes in to say that Whitacre’s compensation package is “appropriate,” but wouldn’t disclose whether GM’s planned payback of government loans would free it from compensation oversight. All but $1.7m of Whitacre’s annual compensation is in the form of stock that would not be redeemable until an IPO in which the government would sell all or some portion of its stake in GM. Feinberg argues that this provides Whitacre with the appropriate motivation, and in theory, it does. But with the government desperate to ditch its stake in GM before any major elections, the UAW’s VEBA fund eager to monetize its “stakes” in the automaker, and Whitacre being paid a huge amount in stock, all the factors seem to motivate those involved to IPO as quickly as possible. Which would be a good thing, as long as taxpayer equity isn’t wiped out to the tune of $30b+, as has been estimated by the government. Because if we’re paying Whitacre nearly $10m per year for that, well, what’s the point?
Meanwhile, where’s the “I’ll-do-it-for-a-buck-a-year” Iaccoca spirit gone? If Whitacre was really playing hardball with Feinberg, and would have left after taking control as Chairman and CEO if he “only” made the same $950k in cash that Fritz Henderson made, what does that say?
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Whitacre’s position is much like that of Wagoner’s, and indeed most CEOs whose companies are struggling: the less that is said about his compensation (esp. in relation to his company’s performance), the better.
Just like the less is said about the Equinox’s highway fuel economy, the better…though Chevy itself seems determined to continue talking about it in their marketing.
I know I’ve seen flak about Iaccoca’s “Dollar a Year” being largely symbolic (I honestly don’t remember where or how, and it may have been just a bunch of haters) but I think we could use the symbolism now.
Iacocca cleaned up at Chrysler despite earning a dollar a year, because he payed himself heavily in stock, especially when he first took over. As he turned the company around and the stock price rose, he walked away with a lot of money.
However, there is nothing wrong with that, as it meant that his compensation was based around the company’s success. If the company recovered and did well, Iacocca would have walked away with a boatload of money. If he screwed up and the company failed, he would have walked away with absolutely nothing.
I wonder what Barney “Fanny May” Frank would be doing for money if they paid HIM less?
Corrupt SOB.
http://www.businessandmedia.org/articles/2008/20080924145932.aspx
The dollar a year thing was a pretty effective gimmick, but it was a gimmick. I’ve got no problem with using our tax dollars in a pay for performance scenario for GM executives, but just like Whitacre’s predecessors, there are no publicly announced business goals for GM that I’ve heard.
Executives don’t want that level of accountability, but you would have hoped that a government owned organization would be required to reveal that type of accountability. As Barney Frank says, oh well. Only he’s in a position to do something about it. But isn’t. Shocka.
Iaccoca style leadership is hardly present anywhere in corporate America. Southwest Airlines is the only big company that comes to mind with that style.
What the lamestream media forget to mention is that when Lee “cut his pay” to $1 per year, he negotiated an extraordinary amount of options and warrants in return for the pay cut.
Two ways to view this: 1) he took a big risk and was rewarded extremely well for taking that risk. 2) Given the backing of the USA to finance the restructuring at the time, he was playing with house money.
He seems to be a pretty smart guy. Draw your own conclusions.
Barney Frank has fed himself at the government trough for years, so I guess he’d know if others are being overpaid, he’s had first hand experience.
I’d say gorged himself … look at the pictures of young Barney and old Barney and watch his double-chin grow and grow.
Funny how corrupt Barney Frank is and congress in general. I doubt any, maybe with a few exceptions, can say that Whitarce is getting payed too much when you look at the job that they are doing themselves.
I wonder, if as a government-apointee to his position, whether Whitacre now recevies free Federal Health Insurance for life…
GM is proof pay for performance does not work. Regardless, if Whitacre and Lutz are unhappy with their compensation and have better offers they should accept them.
Pure politics on Frank’s part, Whitacre and the auto industry are easy targets. Would you expect anything less from a politician?
Which would be a good thing, as long as taxpayer equity isn’t wiped out to the tune of $30b+, as has been estimated by the government.
There’s a way to skin this cat. Give Whitacre $1 million/year in cash. Then, structure his pay so that he makes a pile only after the taxpayers have been made whole.
If he doesn’t like it, he can quit.
At the risk of being an old fart, let’s get our nomenclature straight, please?
Chrysler’s “bailout” in the Iaccoca days was NOT a government bailout like we are seeing today.
What happened was Chrysler was loaned money by the PRIVATE sector, who, unlike the last few years, had some reservations about loaning money, and actually wanted to have some hope of getting paid back.
The gov GUARANTEED the loans. Taxpayers were only on the hook IF Chryco didn’t pay the private lenders back. NO taxpayer funds ever went out the door.
I realize this is a minor point to some, but it really isn’t. Back in the day, no financier would have let GM or Ford get TENS of BILLIONS dollars in the hole, with no way evident on the balance sheet to pay it back.
To equate (if only in name) the Fed being Chryco’s cosigner for a bank loan with the wholesale rape of the American taxpayer that just happened is just this side of revisionist history.