GM wants no salary caps

[SVT666]

GM chairman suggests fed should lessen executive pay caps
11/11/2009, 4:43 AMBY MARK KLEIS


In a recent speech at a Texan university, GM?s chairman Ed Whitacre criticized the current salary caps set by the Obama administration for GM?s senior executives by pointing out the difficulties GM is facing hiring quality replacements.

Whitacre spoke in detail in regards to both the current challenge of hiring competitive individuals with restrictive pay offerings, as well as the recent failure to find a buyer for Opel. Whitacre went as far as to urge the president to consider less restrictive pay caps in order to increase GM?s ability to find the best talent available for its key roles.

An example of GM?s inability to obtain new talent can be found with its CFO position ? currently held by Ray Young, who was asked to step aside back in September. Young is still the acting CFO for GM as they have not yet found a suitable replacement.

?To find top-level people where you need them, that?s a more difficult thing to do at that salary level,? Whitacre said. ?I don?t think (the caps) will be lifted, but hopefully they?ll be modified.?

The other hot topic that Whitacre touched on was the tumultuous experience that has become the now failed sale of GM?s European brand, Opel. Whitacre has spoken in very little detail concerning GM?s shopping around of Opel since becoming one of the 13 board members for GM as they emerged from bankruptcy back in July ? until now.

Whitacre said, ?It?s been a confusing decision, but I don?t think it was handled badly.? Whitacre also told reporters, ?The circumstances have changed from the time this started. The financial part of the business got better.?

As it stands Whitacre and the board support GM?s CEO Fritz Henderson in his decision to continue to hold onto the Opel and Vauxhall brands.

[S204STi]

To limit one corp while others are allowed to pay people what they're worth basically guarantees that mediocre leadership will continue into the forseable future.

[Submariner]

Or maybe Obama should have just stayed out of it. 

[GoCougs]

The mindset that would be so immoral as to have the government impose salary caps on private corporations does not understand the concept of market value or business in general. To such a mindset, the corporation's goal is to provide jobs at a "living" wage and to in general better society; part and parcel of said mentality is to protect labor's delicate sensitivities by bucking down the Rich White Old Man in the corner office.

GM is doomed if it can't get good talent, but IMO the government's plan all along has been to eventually nationalize GM, so this is of little consequence.

[Byteme]

GM wasn't doing so hot with the talent they were getting when there were no salary caps.  It might improve things if they were limited by the talent they would get with the caps.   

[FoMoJo]

To limit one corp while others are allowed to pay people what they're worth basically guarantees that mediocre leadership will continue into the forseable future.

In my experience, over many years, it's not always the better paid who contribute more to the success of an entity.

[the Teuton]

Or maybe Obama should have just stayed out of it. 

Truth be told, GM should have declared bankruptcy in 2005. Waiting this long just made sure that the company was not only insolvent but also broke.

GM's managers should have acted as soon as things started going downhill. Without a big-ass loan, GM would have gone belly up. Thing is, though, in 2005, they still had enough credit to secure some bonds to keep the company going in the right direction. Both GM and Chrysler were incredibly mismanaged. If the government hadn't acted, they'd both be gone or vastly different right now. I'm not defending the government doing what it did, but I am saying that no one else could have helped those companies out at this stage of the game.

[S204STi]

GM wasn't doing so hot with the talent they were getting when there were no salary caps.  It might improve things if they were limited by the talent they would get with the caps.   

In my experience, over many years, it's not always the better paid who contribute more to the success of an entity.

I realize that you gentlemen have significantly more experience in such things, so I'll concede that you're likely correct.  Pay may not be a good standard of the quality of the person in charge, but then again, someone who has a successful track record in the past has been able to ask for a higher salary.

[the Teuton]

Wendy's is considered the best indicator of restaurant placement in the industry. If a Wendy's is placed somewhere, count on a Burger King and a McDonald's being nearby within 6 months.

That said, as soon as Ford indicated it was restructuring in 2005, GM should have followed suit immediately. As for Chrysler, I blame Bob Eaton, and I hope that man burns in hell. To blame him without pointing any fingers at Lee Iacocca would be a bit of an injustice, though.

[sportyaccordy]

GM wasn't doing so hot with the talent they were getting when there were no salary caps.  It might improve things if they were limited by the talent they would get with the caps.   

I don't think the cost of hiring quality management would really impact GM's revenue

In my experience, over many years, it's not always the better paid who contribute more to the success of an entity.

Obviously, but you're not gonna be able to get the kind of CEO GM needs for a million dollars a year, esp when they have Obama & Co watching their every move.

The whole venture has been a complete failure.

[SVT666]

I've been reading around on other boards to see what other people are saying about this and your country is no different then mine.  Full of retards.  "Maybe they'll get someone committed to making GM successful instead of someone looking for a big paycheck" seems to be the most common posting.  Are people really that fucking stupid?

[TBR]

Sporty is right. Alan Mullaly, probably one of the top 5 auto execs in pay, makes $4/car. That's his total compensation too, not just his salary. It is an insignificant expense that can make a huge difference.

If you expect good performance out of them, you will have to pay an officer (CEO, COO, CFO, etc) more than $200k/year to run a company the size of GM. The salaries don't need to be much more than that, but there should be huge performance related bonuses (related to their performance, not the performance of a fickle car market). This performance could be measured by cost structure, market share, etc.

[TBR]

I've been reading around on other boards to see what other people are saying about this and your country is no different then mine.  Full of retards.  "Maybe they'll get someone committed to making GM successful instead of someone looking for a big paycheck" seems to be the most common posting.  Are people really that fucking stupid?

There aren't too many white knights working in the corporate world.

[sportyaccordy]

There aren't too many white knights working in the corporate world.

Not till Obama puts the socialist barrel to a CEO's dome. 

[FoMoJo]

Sporty is right. Alan Mullaly, probably one of the top 5 auto execs in pay, makes $4/car. That's his total compensation too, not just his salary. It is an insignificant expense that can make a huge difference.

As much as I respect what he has done at Ford, you still give Mullaly too much credit.

If you expect good performance out of them, you will have to pay an officer (CEO, COO, CFO, etc) more than $200k/year to run a company the size of GM. The salaries don't need to be much more than that, but there should be huge performance related bonuses (related to their performance, not the performance of a fickle car market). This performance could be measured by cost structure, market share, etc.

I don't have any disagreements with paying performance bonuses if it's measured over a realistic time frame and is based on values tied to the performance of the company; like stock options.

[Byteme]

If you expect good performance out of them, you will have to pay an officer (CEO, COO, CFO, etc) more than $200k/year to run a company the size of GM. The salaries don't need to be much more than that, but there should be huge performance related bonuses (related to their performance, not the performance of a fickle car market). This performance could be measured by cost structure, market share, etc.

Correct me if I'm wrong, but I believe the $500,000 being bandied about isn't a cap on total compensation; it's just a cap on salary.  I believe other components of total compensation, such as stock options and the like are not capped.

[TBR]

Correct me if I'm wrong, but I believe the $500,000 being bandied about isn't a cap on total compensation; it's just a cap on salary.  I believe other components of total compensation, such as stock options and the like are not capped.

Total cash compensation I believe.

Stock compensation is useless as long as it is a privately held company.

[TBR]

As much as I respect what he has done at Ford, you still give Mullaly too much credit.

I didn't give him any credit. My point was that the pay of even one of the highest paid executives in the auto world is a negligible expense.

I don't have any disagreements with paying performance bonuses if it's measured over a realistic time frame and is based on values tied to the performance of the company; like stock options.

GM is  privately held company, stock options aren't going to be much of a motivator. Furthermore, for a public company stock options also reflect the whims of the stock market in addition to the whims of the auto market. I just think that an incentive system involving cold hard cash can be more effective at both short and long term growth if structured properly.

[SVT666]

Those stock options can not be cashed out until two years have passed and only then you can only cash out a third.

[TBR]

Those stock options can not be cashed out until two years have passed and only then you can only cash out a third.

Pretty sure stock options can have lots of different possible terms.

And, it is worth noting that the value of stock options is based on the value of the stock, and the stock market tends to think in the short-term, not the long-term. Thinking in the short-term has been a huge problem for the Big-3.

[GoCougs]

Why do you guys insist on coming up with you feel is a "proper" way to compensate an executive?

To tie compensation to company performance is not only illogical, it's not your, or the government's, call. For example, is/was most/all of YOUR compensation tied to company performance???

For example, Mulally was worth every penny of the $9MM signing bonus he got before he ever set foot on Ford property, even if he torpedoed the company. EVERY CENT.

[Byteme]

To tie compensation to company performance is not only illogical, it's not your, or the government's, call.
As a private stockholder, I believe it is my call. And one would argue that the government has a vested interest given it's investment in GM.

For example, is/was most/all of YOUR compensation tied to company performance???
A pretty good chunk of it is, yes. And the value of my stock options vary as my company's performance varies.

For example, Mulally was worth every penny of the $9MM signing bonus he got before he ever set foot on Ford property, even if he torpedoed the company. EVERY CENT.
Ford is suckling at the public tit.  GM is.

[FoMoJo]

Why do you guys insist on coming up with you feel is a "proper" way to compensate an executive?

Are we not part of the free market system that determines market values; albeit a small part?  If not, it means the market is ruled by elitist principles and thus, not free at all.

To tie compensation to company performance is not only illogical, it's not your, or the government's, call. For example, is/was most/all of YOUR compensation tied to company performance???

Most companies tie the variable aspects of compensation to company performance.

For example, Mulally was worth every penny of the $9MM signing bonus he got before he ever set foot on Ford property, even if he torpedoed the company. EVERY CENT.

No different than signing a 'star' athelete to a team.  It attracts income in the form of customers and sponsorships.  In the case of Mulally, it attracted investors.

[TBR]

Why do you guys insist on coming up with you feel is a "proper" way to compensate an executive?

To tie compensation to company performance is not only illogical, it's not your, or the government's, call. For example, is/was most/all of YOUR compensation tied to company performance???

For example, Mulally was worth every penny of the $9MM signing bonus he got before he ever set foot on Ford property, even if he torpedoed the company. EVERY CENT.

As the majority stock holder of GM, it is very much the governments business.

And, yes, my compensation has in the past been tied to company performance, and I was hardly above the peon level. About half of my dad's compensation is performance based, and he is two or three tiers from being a CEO. It is hardly an unusual thing for compensation to be tied to performance and for an executive his/her performance is reflected in the company's results. Furthermore, any stockholder has an interest in executive compensation as it is one of the many responsibilities of the board of directors (who, of course, represent the stockholders in theory).

[sportyaccordy]

Why do you guys insist on coming up with you feel is a "proper" way to compensate an executive?

To tie compensation to company performance is not only illogical, it's not your, or the government's, call. For example, is/was most/all of YOUR compensation tied to company performance???

For example, Mulally was worth every penny of the $9MM signing bonus he got before he ever set foot on Ford property, even if he torpedoed the company. EVERY CENT.

You make good points this time Couganator but you're still on probation....

[GoCougs]

As a private stockholder, I believe it is my call. And one would argue that the government has a vested interest given it's investment in GM.

No, it is "your call" in the sense in that have (minuscule) power in the ability to affect who sits on the BoDs...

And note that the majority vote for a BoD that pays out non-meritous millions to Ford execs...

For example, is/was most/all of YOUR compensation tied to company performance???
A pretty good chunk of it is, yes. And the value of my stock options vary as my company's performance varies.

But the majority of what you make is salary, just like the rest of us.

My point being how the lower ranks are paid doesn't have a bearing.

Ford is suckling at the public tit.  GM is.

Presumably not suckling...

Not yet at least but make no mistake Ford still sucks in a profound way at making money from cars.

[GoCougs]

Are we not part of the free market system that determines market values; albeit a small part?  If not, it means the market is ruled by elitist principles and thus, not free at all.

No, the market is private people making private decisions with their own private property.

Most companies tie the variable aspects of compensation to company performance.

Doesn't mean all have to.

No different than signing a 'star' athelete to a team.  It attracts income in the form of customers and sponsorships.  In the case of Mulally, it attracted investors.

Yes, very true. My point was he was worth it without having ever done one bit of objective good for FoMoCo.

[GoCougs]

As the majority stock holder of GM, it is very much the governments business.

And, yes, my compensation has in the past been tied to company performance, and I was hardly above the peon level. About half of my dad's compensation is performance based, and he is two or three tiers from being a CEO. It is hardly an unusual thing for compensation to be tied to performance and for an executive his/her performance is reflected in the company's results. Furthermore, any stockholder has an interest in executive compensation as it is one of the many responsibilities of the board of directors (who, of course, represent the stockholders in theory).

Uh, the operative context being that the government should not have de-facto nationalized GM...

My point being, again, there is no Grand Law of Compensation that says if (or what proportion) of compensation should be performance based.

[Tave]

Are we not part of the free market system that determines market values; albeit a small part?  If not, it means the market is ruled by elitist principles and thus, not free at all.

Your position is not internally consistent.

Are we a small part of the free market system? Yes, inasmuch as we buy and sell goods and services.

"Determining" compensatory packages is the very "elitist" behavior that you supposedly object to. It is entirely elitist to assume that one man, one government, one party, or one public could possibly know how to fix executive salaries. No single person on the face of this earth knows what automotive CEOs should be payed.

[TBR]

Uh, the operative context being that the government should not have de-facto nationalized GM...

My point being, again, there is no Grand Law of Compensation that says if (or what proportion) of compensation should be performance based.

I don't disagree. I am just sharing my thoughts on executive compensation, not saying that it should be law. It is the board of directors job to do this kind of stuff and that should remain the case. Considering events thus far, the government controls GM's board of directors. I don't think this is right, but that's how it is so it makes sense that they would have oversight over executive compensation. What doesn't make sense is the government trying to control executive compensation at other companies at which they are only bondholders (banks).