Automaker CEOs actually believe they’re getting the short end of Corporate America’s executive pay stick. Amazingly enough, they actually have a case — and the rest of us have a reason to demand a total overhaul of U.S. executive pay.
By Sam Pizzigati
All eyes this week will be on the return of the auto industry’s Big Three to Capitol Hill. No one knows for sure what will happen with the industry’s bailout request. But one thing seems certain: The Big Three’s CEOs couldn’t possibly give another performance as dreadfully disastrous as their appearance before Congress last month.
The auto chiefs started that fiasco by flying down to Washington on private jets. Then, in their testimony, they came across as arrogantly greedy when asked if, in return for a bailout, they would consider dropping their salaries to $1.
“I think I’m OK where I am,” pronounced [1] Ford CEO Alan Mulally, who took home $21.67 million last year.
Detroit’s Big Three all, of course, maintain small armies of PR consultants, and these PR types have no doubt been advising their chief executive clients that insisting on CEO pay business-as-usual may not be the best way to win friends and influence people. So how could Detroit’s top execs have behaved, in public, so cluelessly?
[2]The simple answer: Detroit’s top executives simply don’t understand the fuss about their compensation. Deep in their hearts, they consider themselves underpaid.
Ford’s Mulally and his automaker CEO peers actually do have some reason to feel that way. Other executives at U.S. enterprises just as troubled as theirs make far more money than they do. Last year, for instance, Merrill Lynch CEO John Thain pocketed [3] $83.1 million, and the melting Merrill certainly had no better of a year than GM or Ford.
In 2007 overall, CEOs at America’s 10 top financial services firms collected a combined $320 million, in a year that the companies they led “reported [4] mortgage-related losses that totaled $55 billion.”
On the other hand, by any rational yardstick, U.S. automaker top execs have absolutely no reason whatsoever to feel put upon at pay time. They take home far more in rewards than auto executives outside the United States who compete in the same global marketplace.
Just how much more first became vividly evident ten years ago when Chrysler merged into Daimler-Benz, the world-class German car company.
Daimler-Benz, at the time, outpaced Chrysler on every standard corporate performance measure from revenue to profit. But executives at Chrysler, remarkably, were taking home considerably bigger paychecks.
In 1997, Daimler’s top gun, Juergen Schrempp, earned an estimated $2.5 million. Chrysler’s Robert Eaton that same year took home $16 million, over six times more. Chrysler’s top five execs, together, collected $50 million in 1997 compensation. Daimler’s top ten execs pulled in only $11 million.
Pay differences between American and Japanese auto executives run even wider.
In the fiscal year that ended in March 2007, Toyota’s top 32 executives — a group that included CEO Katsuaki Watanabe — together pulled in $7.8 million [5] in bonuses on top of salaries of $12.1 million. For the comparable period, one single GM exec, CEO Rick Wagoner, raked in $10.2 million.
Ironically, Ford’s current CEO, Alan Mulally, came into the auto industry from Boeing, a company with a relatively egalitarian — by American standards — pay tradition. In Boeing’s golden years, observes author David Kusnet, whose new book [6] explores the aircraft giant’s history, a Boeing CEO would never have considered flying into Washington in a luxurious private jet.
“Even though Boeing makes jets,” Kusnet noted [7] last month after the Big Three’s initial bailout request, “flying around in corporate ones would have been as alien to them as wearing Gucci loafers.”
Back in 1969, Kusnet relates, Boeing CEO T. A. Wilson took a regular commercial flight to Washington to testify before a congressional committee.
“Instead of a limousine,” he adds, “Wilson was met at the airport by Geoff Stamper, the son of Boeing’s second-in-command, Mal Stamper. Geoff Stamper was a student at American University, and he drove Wilson into town in a rusted jalopy.”
America’s automakers, lawmakers are now declaring, are going to have to transform their industry if they want to get their hands on taxpayer dollars. But America needs a transformation that goes far beyond how the auto industry makes cars. We need a transformation of our entire CEO pay culture.
Sam Pizzigati, an associate fellow at the Washington, D.C.-based Institute for Policy Studies, edits Too Much [8], the online weekly on excess and inequality.