Ford CEO Rakes in $28M for 4 Months on Job
April 17, 2007 at 12:05 am 34 comments
I know news like this shouldn’t throw me into a state of incredulous disbelief anymore, but it still does. From a CNN article, see the full article at the link below:
“Struggling Ford Motor Company, which posted a record $12.7 billion net loss in 2006, gave its new CEO Alan Mulally $28 million for four months on the job, according to a statement filed Thursday. The details were made public as Ford moves ahead with plans to close plants and cut more than 30,000 hourly positions from the company in an effort to stem losses.”
http://money.cnn.com/2007/04/05/news/companies/ford_execpay/index.htm?cnn=yes
According to the poll on the article webpage, 20% voted that this $28 million, 4-month compensation package is “appropriate if he can turn Ford around” while a staggering 77% thinks it’s “inappropriate no matter what he does.”
If this is truly the case, why do obscenely large corporate bonuses/salaries still remain standard in American and international companies? If the common workers don’t like it, shouldn’t they try to do something? Mobilise? Anything. I mean wow, that’s horrendous. These people at the very top of corporate hierarchies are largely figureheads, and not a whole lot more. What do you think can be done?
Entry filed under: Alan Mulally, business, cars, CEO, corporate, executive pay, Ford, labor rights, manufacturing, salary.
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Musings, Wanderings, and Other Journeys 
1.
adkgirl06 | April 17, 2007 at 12:09 am
elbrigadier, Knoxville, Tennessee, United States; April 5 6:45pm:
And you wonder why capitalism sucks.
2.
adkgirl06 | April 17, 2007 at 12:10 am
twodeep, Oakland, Maryland, United States; April 5 6:51pm:
Actually, you’re wrong about the figurehead status of large corporation CEOs. They determine business plans and provide directions that determine the success or failure of a company over time. It’s not an easy job. I’ll grant that you come across crooks or lazy CEOs once in a while but they are the exception and not the rule.
3.
adkgirl06 | April 17, 2007 at 12:11 am
Yock, Fairfield, Ohio, United States; April 5 6:56pm:
It isn’t a popular job, that’s for sure. He’s being paid the big bucks to make difficult and often unpopular decisions. Where people get hung up is in the number and what it represents. To many, he got paid $28M for firing a lot of people and possibly ruining some lives. Well, yeah, but he also got paid $28M to keep Ford solvent when all indications were that it wouldn’t last past 2008. American automakers must make some serious changes to remain competitive. One of those changes is a staggering reduction in wage expenses, as the much stronger foreign manufacturers control those expenses quite well. Sons won’t get to make bread-winner wages anymore working unskilled positions like their fathers and grandfathers before them. The technology has simply advanced too far for that to be viable.
4.
adkgirl06 | April 17, 2007 at 12:11 am
gdnpty, Charlotte, North Carolina, United States; April 5 6:56pm:
I think it’s basically magical thinking by the board of directors. They want a rainmaker, and they’re willing to pay for it. If they see the dude has a past record of ‘performance’ it mitigates their perceived risk. The fact that he costs so much probably also gives him more credibility. Also, given the company’s losses, they’re probably desperate and looking for a hero since actually improving their business model or moving beyond century-old technology would probably require thinking thoughts that, if thunk, would preclude them from sitting on the board of directors at Ford. That said, I think I just threw up in my mouth a little bit…
5.
adkgirl06 | April 17, 2007 at 12:12 am
SilverJaeger, Harvey, Louisiana, United States; April 5 7:00pm:
I can agree with you, but let me play Devil’s Advocate for a second: These are companies responsible for millions upon millions of dollars in product and assets. Shouldn’t someone at the helm of a company responsible for such an enormous amount of resources deserve something close to that which he is responsible for? Granted, I think 28 million is a lot for just 4 months, but we have actors and sports stars making on par with megacorporate CEOs. And in all honesty, actors and sports stars don’t make a living being responsible for anything meaningful besides our pure entertainment. These people (CEOs) drive economies and create jobs. I think they’re a little more important than Barry Bonds, Peyton Manning, Tom Cruise, and Halle Berry. Now, Halle is hot, don’t get me wrong…
6.
adkgirl06 | April 17, 2007 at 12:13 am
twodeep, Oakland, Maryland, United States; April 5 7:02pm:
http://www.tums.com/ And, judging by American auto makers performances over the last 20 years gdnpty is correct…said board members would be working for Toyota or Honda and are therefore looking for someone to bail them out. Every corporation in Ford’s shape is fishing for the next Jack Welch.
7.
adkgirl06 | April 17, 2007 at 12:13 am
In response to the CEO defenders, I agree…it must be a stressful job being “in charge” of so much capital, and for making tough decisions (albeit with a board of your 10 or 15 closest buddies). I’m not suggesting they make as much as say, a shop machinist. But wowee, 30 to 50 thousand a year versus $28 million for four months? That just seems a little bit excessive. Goes without saying that famous people are somewhat overpaid too, as silverjaeger astutely suggests.
8.
adkgirl06 | April 17, 2007 at 12:14 am
gdnpty, Charlotte, North Carolina, United States; April 5 7:11pm:
Yeah, the CEO and the Board are typically riding a tidal wave and pretending that they caused it.
9.
adkgirl06 | April 17, 2007 at 12:14 am
jimmydigital, Charlotte, North Carolina, United States; April 5 7:11pm:
I agree with the comments posted so far.. and I’ll add this. Some people.. I’d guess roughly 78% of people taking that poll.. have little to no understanding of how the market system operates and react strictly on emotion. They just ‘feel’ that it’s wrong for anyone to make that kind of money.. and yes there is probably a bit of jealousy there too. Some people would much prefer the equal distribution of misery and that no one was rewarded more than anyone else. I fear that mentality is in the majority these days. If Ford didn’t think he was worth that kind of money they would find someone else. If the market for people like that didn’t support that level of compensation then it wouldn’t be that high.
10.
adkgirl06 | April 17, 2007 at 12:15 am
poetnartist, Wilmington, Illinois, United States; April 5 7:13pm:
It’s an unfortunate truth. Frankly, we should have been smarter a century ago, and implimented a “maximum” wage when we did the “minimum”. Every respected economist of the time said one without the other would be ruinous in the long run. It’s costing us big, now. And our CEOs are usually doing a rather good job in their positions. Heck, just as far back as the late 80s, the company model was considered an iconic thing. We are a very, very fickle culture. And our economy is now catching up to reality. Once untouchable on the world stage, we now face plentiful competition. We americans claim we hate monopolies because they exploit the common man…. well, for the last hundred years or so, we *were* the monopoly. If nothing else, you can rest easy knowing that this is the last generation of americans who’ll witness this kind of gross mismanagement. Because the companies who can’t fix these kinds of leaks are going to sink.
11.
adkgirl06 | April 17, 2007 at 12:15 am
gdnpty,Charlotte, North Carolina, United States; April 5 7:14pm:
jimmydigital — fear not, Ayn Rand will come to the rescue. But for serious, just because the market will bear it doesn’t mean it’s not absurd.
12.
adkgirl06 | April 17, 2007 at 12:16 am
sonobuoy,Knoxville, Tennessee, United States; April 5 7:19pm:
“The people” are doing something by continuing not to buy any blue goddamn oval cars. Capitalism is doing an extremely effective job of showing American executives how not to run a car company but it can’t be blamed if none of them can figure out what’s going on.
As for how much money CEOs should make vs what they do make, I’d like to point out that Japanese execs make far less than similar American positions, in part because Japanese CEOs generally have a stronger sense of personal obligation and responsibility to the company. Also, I hope someone at Mazda or Ford Europe somehow manages to seize control of the company because other than the Mustang, American Ford ain’t got shit.
13.
adkgirl06 | April 17, 2007 at 12:16 am
jimmydigital, Charlotte, North Carolina, United States; April 5 7:26pm:
Absurd or not… it’s reality. I think it’s absurd that some people get paid almost as much for a season of playing baseball… or for pretending to be someone else… (acting) but there you go. As for similar positions in other countries… programmers in india make a fraction of what they do here… what’s your point?
14.
adkgirl06 | April 17, 2007 at 12:17 am
poetnartist, Wilmington, Illinois, United States; April 5 7:28pm:
Plus you can get a jap car that runs better, lasts longer, uses less fuel and is safer- for less money. Methinks the blue oval means a little less than the green paper. Our companies are “trimming the fat”- by cutting themselves off at the knees. One day someone will figure out how to do it right- maybe we should stop complaining amongst ourselves and take control of a company to lead by example.
15.
adkgirl06 | April 17, 2007 at 12:17 am
gdnpty, Charlotte, North Carolina, United States;April 5 7:47pm:
jimmy — indeed, reality is what you can get away with.
16.
adkgirl06 | April 17, 2007 at 12:18 am
nevinera3, Alpharetta, Georgia, United States; April 5 8:12pm:
This type of situation isn’t actually an ordinary market choice. These possibly absurd quantities are not assigned to an attribute with objective value, but to something akin to ‘star power’. Look in any business that supports the value of fame, and you’ll find something similar – only so many people can be famous for something, regardless of how many are equally skilled. Other situations may look similar on the outside, but be moved by fundamentally different forces – ball players get paid in the millions because they are supported by a regime that has been very successful at manipulating the public and the market.
‘Free markets’ are rational constructions, and problems like this one arise because the *actual* market is not rational; it is subject to the illogic of the majority of the population. The guy might actually have been worth that much to Ford, as they are a public company – convincing the public that they can do well is just as important as actually doing well. The fact that it was not truly worth that much to the investors that comprise ford is dropped by the wayside, because constructions like the company don’t truly act as rational entities either (in a true free market, they should be doing literally what is in their investors’ best interests; they don’t.)
17.
adkgirl06 | April 17, 2007 at 12:18 am
atropa777, Ypsilanti, Michigan, United States; April 5 9:58pm:
This is why I’m a socialist. Capitalism sucks.
18.
adkgirl06 | April 17, 2007 at 12:19 am
Apparently I am too, according to simple-minded online political tests… I don’t know if I’d label myself as such, but I definitely am worried by the problems of the particular breed of capitalism running rampantly unchecked in the world today. I’m actually reading a book on the global economy at the moment…I’ll post about it a bit later on when I’ve read more!
19.
adkgirl06 | April 17, 2007 at 12:19 am
nevinera3, Alpharetta, Georgia, United States; April 5 10:39pm:
Well now, on the global scale, market principles can be applied a little more accurately, as larger groups of people let you treat the less rational forces mathematically as well. What are you reading, and is it painful to read? I’ve been wondering a few things about this lately. I had a long discussion with a friend of mine about the feasibility of Asimov-style psycho history, in the context of massively evolving technical capability, and I need more information.
20.
adkgirl06 | April 17, 2007 at 12:19 am
Did_I_do_that, Dayton, Ohio, United States; April 5 10:45pm:
No surprise here…. I’m somewhat connected to the similar activities at GM. They want to kill the pensions of people who put in 30 years to save money. The reason these guys can get that money is because major stockholders promise it and they are mostly responsible for how the stock performs. Not much else. They blame money issues on labor costs. Noooo.. You built cars noone wanted, so noone bought them. It’s bad management that put Ford and GM in their boats.
21.
adkgirl06 | April 17, 2007 at 12:20 am
lm44, Southlake, Texas, United States; April 5 10:51pm:
CEO salaries and especially bonuses should be tied to company performance, that’s their job to oversee. By performance, I mean profits and losses, not stock performance. A stock can still rise in value while the company takes a bath.
22.
adkgirl06 | April 17, 2007 at 12:20 am
nevinera- it’s called Global Village or Global Pillage: Economic Reconstruction From the Bottom Up by Jeremy Brecher and Tim Costello. I’m only about 40 pages in and wanted to avoid posting the name for fear of the wry comments it’ll inevitably draw on here, at least until I’ve read enough of the book to discuss it in-depth, but there you have it. I’ll definitely post more on it later. 🙂
23.
adkgirl06 | April 17, 2007 at 12:20 am
Ashcans, Atlanta, Georgia, United States; April 612:52am:
One of the biggest changes over the past decades has been the growing difference between the salaries of executives and common workers. CEOs have always been well paid, but where they used to earn 50 times the salary of their average employee, now they earn hundreds of times the salary. Executive pay almost always rises at a higher rate than that of other workers. I can appreciate that executives may have a harder job that merits higher compensation, but I think there is very fair complaint in the magnitude of it currently.
Nevinera, if you’re genuinely interested in the feasibility of psychohistorical work, let me know. The idea is an inspiration for some of the work I’m doing. There isn’t a book yet, but it’s underway.
Adkgirl, if you don’t like the sound of ‘Socialist’, you could look toward embedded or social liberalism. There are a lot of intelligent people who support markets as a means, not an end in themselves, and recognize their failures. There are really a lot of good works in this area that don’t get much coverage outside of academic political economy.
24.
adkgirl06 | April 17, 2007 at 12:21 am
nevinera3, Alpharetta, Georgia, United States; April 6 9:09am:
Do you have any global econ books from the other perspective to recommend? I like to eat these things in pairs.
25.
adkgirl06 | April 17, 2007 at 12:21 am
Did_I_do_that, Dayton, Ohio, United States; April 6 9:41am:
Ashcan: That’s not a “last decade” trend. It’s been going on for over 25 years. They started talking about the disparity 12 years ago, at least.
26.
adkgirl06 | April 17, 2007 at 12:22 am
nevinera- I don’t know if it’s the exact opposite perspective (it’s next in the pile on my reading list) but it seems to have a very different slant: Globaloney: Unraveling the Myths of Globalization by Michael Veseth. It’s described as “irreverent but important” on the jacket, so it’s probably not quite so painful to read as the first one I mentioned.
27.
adkgirl06 | April 17, 2007 at 12:23 am
NeoSocratan,Vero Beach, Florida, United States; April 10 10:22pm:
Right, figureheads, but they climbed over innumerable ‘little people’ on the way up. Keep in mind, the top 20% of the US’s population, in regards to economic status, own 80% on the nation’s wealth. The ‘peasants’ don’t have a say because our (brief) history as a nation shows that revolutionaries never live long. All through our education into adulthood we are taught of the great men and women of our past, but the most famous and recognizable names are those belonging to the people slain in broad daylight, accompanied by friends, family, bodyguards, televised, or otherwise public. Such a potential fate is easily enough to keep most ‘blue-collar’ workers in line, even if such a threat is never actually voiced. If you stand up alone, you are without a job. If you are one of these unfortunate 30,000 and you already have no job, you are programmed to see your options limited, as set by society.
The stresses of supporting a family on minimum wage is certainly enough to kill the spirit of most would-be revolutionaries, I would think. Besides all of this, the ‘alpha trait’ is extremely rare. It takes a certain type of person to rise against society’s programming – that is, more than just the intelligence to navigate through the half-truths and misleading implications – to see the world in a unique and manageable way. To see the world not as something to exist within, but to hold in your hands and mold as you see fit. These individuals, rare as they are, may be promoted into the ‘corporate monster’ and so removing all desire for them to shift the power of the world, but since I’ve not heard of any research involving ‘alpha traits’ beyond childhood, I can only speculate.
28.
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