The Truth About Cars | Editorials | Ford Death Watch | Toyota
Ford Death Watch 30: Executive Compensation
By neunelf on April 5, 2007
In the first three months of his employment, Ford CEO Alan Mulally earned himself a cool $28.2m. So how's the high flying ex-Boeing exec doing in his campaign to save the embattled automaker? According to Big Al, "it's going pretty well." He's "reduced complexity" (i.e. paid bureaucrats to leave), sent Aston packing, unloaded the first of thirteen surplus-to-requirements Visteon plants and started to make good on cost savings targets. On the income side of the ledger? Not so hot.
Earlier this week, Ford flackmeister George Pipas proudly proclaimed that FoMoCo market share is now, finally, Thank God, stable. His underlings trumpeted "record sales" of The Blue Oval's mid-size Mexican troika and Canadian crossovers. The Fusion had its strongest month ever; 15,790 units made a run for the border. The Edge is selling at a level deemed "comparable to long-established crossover products," boasting 37 percent increases in the U.S. and doubling in Canada.
The company now hopes (against hope) that the badge transmogrified Taurus and hot-off-the-press Flex will generate interest in all things "Dave" and jump start the automaker's entirely theoretical nascent sales recovery. Never mind product overlap. (Ford will have three identically-sized crossovers— Edge, Taurus X and Flex—with identical powertrains.) Feel the buzz.
Meanwhile, it's flat tires at all four corners. The Glass House Gang has just completed its fifth consecutive month of dismal sales and declining market share.
Given the housing slowdown and sub prime debacle (Big Al: "It's a concern"), the pinch is being felt damn near industry wide. Ford is faring worst of all. A quick glance at the less shiny numbers indicates that FoMoCo is on pace to move just over 2.5m units this year, roughly 400k less than last year. Nine percent fewer FoMoCo products hit the street in March '07 than in March '06. Rounding out the first quarter, 13 percent fewer people have bought a Ford, lately.
The usual sales stalwarts, the Mustang and Explorer, are facing declines of 17 and 26 percent respectively. Most disturbing, Ford's cash cow has come a cropper. The F-Series pickup has been knocked from its perch as America's best selling pickup, into the dirt. Year-on-year March sales are down 15.1 percent to 71,481 units. And consider this: the numbers represent the F-Series' best sales month since August 2006.
Ford's new ads stress the F-150's competitive strengths, but it's not just a matter of keeping traditional Ford customers from opting for Chevy, Dodge and Toyota pickups. It's a question of getting people to come on down.
CNW Marketing Research reports that automotive showrooms are emptier than Paris Hilton's panty drawer. Other than Toyota, every major automaker's dealers are seeing less foot traffic than the year– or month– previous. Ford suffered the most from the footfall freefall. Showroom floor traffic sank 18 percent in January, and then slid roughly 28 percent in February and March. Even a 450 horse F150 sold by the CEO himself won't cure those kind of numbers.
The Detroit News reports that The Big Boss is pressuring Mark "Movie Star" Fields (El Presidente del Americas) and Cisco Codina (group think vice president for NorAm Marketing, Sales and Service) to initiate a "full court press" to win back the masses. Failure is not an option. There's been talk of kicking Mark Fields off the corporate jet (saving the company some $5.75m in executive over-compensation) and replacing Cisco Codina with customer service president Daryl Hazel.
Ask the Ford family scions who've seen half a billion dollars wiped off their stock value and their dividends disappear. All this corporate turbulence sucks. But it's nothing compared to the UAW-shaped storm cell that lies dead ahead.
If Mulally can wrest significant concessions from the United Auto Workers this summer, he'll be worth every penny of his $30m salary. The problem is his $30m salary. Quite how Big Al expects the rank and file to take a hit for the team when he's banking tens of millions of dollars, while his family enjoys free corporate jet travel, is an interesting question. Perhaps not as interesting as "Why can't the workers have some of those billions you borrowed?" but close.
Yesterday, Mulally warmed-up for the Ford – UAW Detroit Death Match by announcing that The Blue Oval Boys don't have specific targets for wage and benefit concessions. Nope. They've got a non-negotiable "economic envelope for competitiveness." If you could read the back of that envelope it would probably say "we can't pay you now so we'd like to pay you later."
In truth, Big Al doesn't have a hope in Hell of convincing Big Ron's team to offer anything other than window dressing. Without increased sales or decreased labor expenses, Big Al will fail. He may even get fired— provided Ford can afford Mr. Mulally's $27.5m severance package.
Posted in Editorials, Ford Death Watch, Toyota
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61 Comments on "Ford Death Watch 30: Executive Compensation..."
brettc
CNW Marketing Research reports that automotive showrooms are emptier than Paris Hilton's panty drawer.
That's some good writing. One of the reasons why I love read TTAC. As for the overall article, very good. $28 million, even though Ford can't sell enough cars to be competitive. Simply stunning. Where do I sign up for a job like that?
In the first three months of his employment, Ford CEO Alan Mulally earned himself a cool $28.2m.
If Mulally can wrest significant concessions from the United Auto Workers this summer, he'll be worth every penny of his $30m salary.
I'm confused, does he make $30M a year or $10M a month?
I'm not one to whine about executive compensation, but in the jobs I've had you didn't get to nibble the carrot until AFTER you pulled the cart to the top of the hill.
I guess that the SEC doesn't require them to make public Al's Performance Objectives, but I can't believe he's made 30 mil of headway so far.
SherbornSean
Matthew,
Does CNW Research really issue reports on the status of Paris Hilton's drawers? What other benchmarking studies do they perform?
Are they hiring?
Z31: I'm confused, does he make $30M a year or $10M a month?
Mulally's $28.18 million compensation included $666,667 in base salary, a $7.5 million hiring bonus and another $11 million bonus to offset stock options and other compensation he forfeited when he left Boeing. Other compensations totaled $334,433, which included $172,974 for use of the corporate aircraft by him and his family, $55,469 for relocation costs and temporary housing, and reimbursment of $21,878 to pay his personal taxes on such items.
He also received $920,404 in Ford stock and $7.8 million worth of stock options.
This was for the three months he worked for Ford in 2006. Some of these (the $18.5M "hiring" bonuses and the relocation expenses) won't be paid next year.
Alex Rashev
Professionals are worth money. Nothing wrong with a top-spec executive earning a few dozen million. If he saves the company those same 30 mil (nothing at Ford scale, really) compared to a previous exec, he's worth every penny.
Now, there's everything wrong with a dude turning bolts for 50k/year + pension and medical. I know college professors getting less money, that's after spending 8 years and countless dollars on their higher education.
Unfortunately, most people are too compassionate to easily allow the above. There's a commie in everyone's heart ;)
"to initiate a "full court press" to win back the masses. Failure is not an option."
Oh dear! More stuff in the mail I guess – well the recycling bin isn't quite full yet.
After five Fords, the last two of which had terminal transmission failure at less than 80,000 miles, they can send me as much paper as they like. I'm only likely to buy a Ford once more when I'm senile and desirous of a luxobarge to retire with to Florida. Not!
Anyhow, while I agree that Ford is a very sick company, making fun of executive compensation is old hat. Look, it takes a boatload of cash to a entice talented CEO away from the high paying job, low risk job he had at Boeing.
The issue with Mullaley is not his pay, but his effectiveness. Given that it takes 3-5 years to get a new model out the door, you have to give him a chance to earn it.
So far, what we know of Mullaley is:
– he is charismatic and has impressed the media
– he expects a lot of his direct reports and isn't afraid to hold their feet to the fire
– he isn't above going to an actual dealership and selling cars
That's not a bad start. If he can consolidate redundant product development efforts, reinvigorate the culture, and get some hot product into the showrooms, he'll be a hero and no one will begrudge him his pay.
Redbarchetta
Hero's can't save Dead horses!
William C Montgomery
In January I wrote an editorial enumerating lessons that the Big 2.5 should learn from Apple Computer. To my discredit, I missed a big one: executive pay. When Mr. Jobs returned to take over the reins, he accepted a salary of just $1 per year. Whatever compensation he has received from Apple has been in the form of bonuses (including $93mm for a Gulfstream jet) tied to company performance. In other words, Jobs has made out like a bandit – but he has earned it.
troonbop
It does seem to take that kind of money to attract the guy you want – problem is, the UAW is a little skeptical about that concept.
And BTW, wouldn't ms hilton's panty drawer be really full because she don't wear 'em? Just asking. And thinking.
"If Mulally can wrest significant concessions from the United Auto Workers this summer, he'll be worth every penny of his $30m salary. The problem is his $30m salary."
Yikes! I bet Al is kicking himself for leaving Boeing… And Ford is paying Al to stop kicking himself.
And on an off-topic lighter note:
Here comes the Cavalry (Cavalier?)
http://money.cnn.com/2007/04/05/news/companies/kerkorian_chrysler/index.htm?postversion=2007040514
Glenn A.
This link seems more pertinent to this stream than the news about Chrysler, though I do see the relevance. As in, Detroit, Inc. is all sinking….
http://money.cnn.com/2007/04/05/news/companies/ford_execpay/index.htm
C'mon troonbop. Her drawer would be empty 'coz she HASN'T any undies!!!!! Ha.
Eric_Stepans
The problem with compensation packages for execs like Mulally is that there's no way to run a "Monte Carlo simulation" and see if the decisions he implements actually improve Ford 99% of the time, of just on an occasional statistical fluke.
Also, how do you know whether or not that $30 million is buying better decisions than a guy making $10 million would make? or $1 million? or $10 to write an 800-word article…
https://www.thetruthaboutcars.com/?p=2999
Never mind product overlap. (Ford will have three identically-sized crossovers— Edge, Taurus X and Flex—with identical powertrains.)
I believe this is an incorrect statement. Currently, Ford is only selling the Edge and Taurus X, the former having two rows of seats, while the latter has three rows of seats. When the Flex comes to the market, I would imagine that Ford will kill the Taurus X.
One interesting wrinkle is that the next gen Explorer is likely going to be a car based SUV with three rows of seats, potentionally creating overlap with the Flex. It will be interesting to see how Ford distinguishes these two vehicles.
Sum where here in the new upside down world at TTAC I think it was sherborn sean that wrote,big Al M is not afraid to hold his direct reports feet to the fire.
That alone makes him worth 30m a year IMO.
Please AL when your all done kicking the dead wood out of Ford,we are looking for someone like you at GM.Course they don't consult me before they hire,but we need an ass kicker as opposed to a kisser.
Steve_S
I'd say Mulally is worth his salary a hell of a lot more than most athletes or movie stars.
You also can't compare him to Steve Jobs either. Was Mulally the founder of Ford like Jobs was of Apple Computer? No. This is merely a career position, likely temporary (how many CEO's stay in the same place for 20 years?) and he is getting paid accordingly. We'll see in the next few years if it was money well spent or not.
All in all Ford's new product isn't bad, the Edge is competitive and is Ford's only 5 seat CUV (excluding Mazda since they operate more-or-less independently) the Flex appears to be a good product on paper and has some unique appeal. I would have made my wife test it last year when we bought our minivan if it had been out. The Freestyle/Taurus X I'd imagine will be discontinued shortly. It no longer serves a purpose with the Flex in the lineup.
When they finally announce a plan for Mercury we'll see if Big Al is on the ball or not. Mercury needs something significant, its need a focused direction well beyond rebadged Fords.
daro31
"Big Al M is not afraid to hold his direct reports feet to the fire.That alone makes him worth 30m a year IMO."
Having only made it to middle management at a Ford assembly plant, I was a universe away from the direct reports to a guy like Big Al. I was expected to think, implement, put in what ever effort or hours it took and if my feet had to be held to the fire than I did not deserve my management position. Why,with the salaries that the direct reports to Big Al are paid would anybody have to hold their feet to the fire. I would think that level of skill and intelligance that they are paying so much for so that they don't abandon ship, Big Al' problem would be to hold back all of that enthusiasm and brain power and co-ordinate it to be effective. Maybe that is it, they have to pay them so much because they all have such wonderful solutions to save the company and Big Al is afraid they will take it to the competition.
Jason Pollock
How do you figure that? Athletes and movie stars both operate in (generally speaking) profitable industries. In other words, they make money for their employers even after you figure in their compensation. How much profit is Mulally actually generating for Ford?
50merc
Another well-written piece. But it's depressing to see that FoMoCo brass are still in denial, just like the UAW. The 2.5 have lost the pricing power that permitted high-cost operations to prosper. A new lean paradigm is required. Labor is the only variable cost that is relatively controllable, but the UAW insists on continuing exorbitant pay and benefits. Why not — they see executives are still living like arrogant potentates (paid millions yet getting companies to cover personal family travel expenses).
In 1920 a recession hit the auto industry. Henry Ford also needed boatloads of cash for his stock purchases, River Rouge, etc. He went through the plants like Ghengis Khan on a cost-cutting campaign. Staffing was cut a third. (So many accounting jobs were cut Henry had to rely on year-end bank statements to gauge profit or loss.) Office furniture, adding machines, etc. were put out for a gigantic yard sale. When the national economy turned back up, FoMoCo was like a license to print money.
In my part of the country there was once a major grocery wholesaler. It had long prospered, but it became a high-cost operation in a low-margin industry. Their headquarters building was like a palace, and the executives had million-dollar pay packages. At Wal-Mart headquarters, it's cubicles even for managers, and keeping costs down is a religion. About three years after Wal-Mart got into the supermarket business, that major grocery wholesaler went bankrupt.
Of course, Toyota pays a lot better than Wal-Mart. But it's like the old joke about the two guys who are running from a bear. The guy who'll survive doesn't have to be faster than the bear, just faster than the other guy.
CliffG
As THE resident Mullally basher, I resent this. After all, if Lutz gets to helicopter in to his work every day, it is only fair that Alan gets a jet. He has to see something once in awhile that he knows something about. Besides, Seattle is a long way from Detroit, and both of those public airports suck mightily.
I did notice he charmed much of the press at the NY auto show, even though Jill Wagner could have done it a lot cheaper, and would have been nicer to look at. Has he said anything so far to recognize that F doesn't have captive unions, has more than one competitor, gets no government largesse, and has product cycles delineated in months rather than decades? Let me know when he does. Incidentally, can anyone guess exactly how large is that compound in Aruba that has to house all of these golden parachuted auto execs as they come fluttering in over the next couple years? Hey, how ya doing Ricky?
whitenose
It's way too early to judge Mullaly, but it sure isn't looking good. Yes, he's overpaid. Most CEOs of large corporations are overpaid. Very few of them are actually worth as much as they earn. Steve Jobs is one. Jeff Bezos may be another. This is a big problem in this country, for many reasons which are not on-topic for this site.[*]
Note that Iaccoca, who is not exactly the poster child for wage fairness, took a temporary cut to show the union that he was bargaining in good faith. This move, along with many other shrewd actions, saved Chrysler in the early 80's. I doubt Mulally will be willing to do the same.
[*]How much money does one family need? You've already got enough to sustain yourself and your family with yearly new HDTVs in every room of your overlarge McMansion and your own private jets, and the money itself in the bank will yield well above a line worker's salary in interest every year, and you don't even have to pay for your own health insurance as long as you're still employed at Ford. Remember what the Bible says about rich men and heaven, and remember what the the Hitchhiker's Guide says about mindless jerks in marketing.
Mr. Neundorf has only told half the story- the good half at that:
Today the WSJ reports that Ford's top 7 execs made over $62 million in 2006. Now maybe the CEO gets the benefit of the doubt because he's new, but weren't the other six at the front of the bus during their trip into the ground?
Whitenose,
Maybe you might want to consider the fact that a good CEO who earns a lot of money will later invest that money into proper companies, creating jobs, improving products we use, etc.
I'd rather have that than give the money to proletariat who'll most probably just waste it.
Of course, again, the issue is highly political. After all, pretty much every working person in this world is feeling underpaid, so nobody's going to give in without pointing fingers. And top-level exec earning 30+ millions is easy to point at.
I'm sorry, paying Big Al so much money UP FRONT is nuts.
Personally, I've got no problem with Mr. M getting a base salary roughly commensurate with his peers; say, roughly the same as ToMoCo's top dog.
And I've got no problem with Ford giving him performance related pay. None. Sky's the limit. He can have a percentage of increased net for all I care.
But I DO have a problem with a man earning this kind of money asking anyone else to take a pay cut.
Of course, what I think isn't really the point. It's what the UAW rank and file think; and believe you me, they're less understanding in these matters than I am.
Hello? Did Ford's BOD miss the fact that the company is about to enter life or death negotiations with their unions?
Couldn't they have at least pretended to be sensitive to the working stiff?
NoneMoreBlack
Farago's basically got it. A CEO earns extraordinary compensation for providing services in excess of those of the ordinary employee; it's impossible to say where Ford might now be if he hadn't been brought in, and it's difficult to say how much better or worse the company might be having employed somebody that was willing to work as a CEO for only, say, $10 million. If, by employing a $30 million CEO rather than a $10 million CEO increases their earnings by even some small fraction of a percentage over the course of his tenure, then they will have made back that difference and more.
And hiding compensation in the form of corporate jet use etc is just marketing; for whatever reason they've decided that it looks better to give the CEO $10 million worth of jet rides than simply $10 million more salary. I agree with Robert that what's key here is the image being projected; if he took a symbolic pay cut of something like 10%, it would probably not drive him to working elsewhere and at least appease some of the more shallowly-thinking critics.
tms1999
Maybe squeezing some take back out of the UAW negotiations is not going to be that relevant. Maybe they will continue to expand their factories in Mexico, Canada and elsewhere to the point where organized labor built in the US is going to be a moot point.
And there would be no point at waving the patriotic flag in this case, people have long been used to buy everything "made in china" so a little more or a little less does not count.
If Ford's top 7 exec's got $62 mill in 2006, while they were steering the company into the abyss, that's further proof things are seriously out of whack. Executive compensation should be based on three elements: ability to manage (a blend of knowledge, skills and personality), nature of responsibilities (a blend of scope and intensity), and vision (taking the organization in the right direction). It's the latter (e.g., deciding "we'll make iPods!") that justify the biggest rewards, because all other stakeholders can share in the resulting prosperity.
Unfortunately, the big brass all get paid like they've taken the company to the Promised Land even if they've just kept chairs warm. Boards of Directors that allow this fail their fiduciary duties. "Board of Bystanders," indeed.
So I empathize with Whitenose. But "how much does a family need" is the wrong question. That leads down the path to that old slogan "from each according to his ability; to each according to his need." (Who said that — Groucho? Harpo? Oh wait, maybe it was Karl. Well, whoever. It didn't work out anyway.)
Jeffer
How much money does one really need? Corporate greed is almost unbelievable. I have no problems with the super rich if they started a company and created employment, of course I expect them to be philanthropic.No person is worth the sums of money that we see being given to these folks.
rossjk
That marketing stunt Mulally's handlers and cronies arranged did nothing more than to spray perfume on the turd. Perception is reality and no one bought it.
A huge pay package might have been necessary to pull in a known name, but nothing short of gutting management and significantly overhauling the culture will turn this Titanic around.
Ford continues to reap what it has sown.
Sorry, the marketing stunt I refer to is the "Let's get Al to sell a truck to see how it's done".
Geotpf
Ford had sales of 264,975 in March 07, compared to sales of 291,146 in March 06, a difference of 26,171. Considering thier sales of the (fleet-only old-style no-profit) Taurus were 20,262 in March 06 and zero in March 07, they aren't doing that bad (basically, not counting the Taurus, they only had a drop of 5,909 units). They aren't doing good, either, but they are more trending water than losing significant ground, at least for March (the full first quarter's numbers are a bit worse-a drop of 97,878 with only 51,833 Taurus sales in 2006, for a 46,045 difference).
Robert Farago: "Personally, I've got no problem with Mr. M getting a base salary roughly commensurate with his peers; say, roughly the same as ToMoCo's top dog."
The head of Toyota makes less than one million dollars a year (as of 2002, I can't find newer figures). Really:
http://www.manifest.co.uk/news/2004/20040510Forbes.htm
Somehow I don't think Boeing Dude would have jumped ship for a six figure salary.
jerseydevil
'Let then eat cake", says Mulally
TampaWRX
With the sorts of salaries being paid top executives, it's a wonder every American company doesn't fail. For has one foot in the grave and the other in a puddle of oil. Alan Mullaly seems to be more about giving the company a push into oblivion than cleaning up the mess. When will this trend of grossly overpaying executives end?
mrdweeb
Actually, it's empty as Britney Spears' panty drawer.
Steven Lang
RF, your write-up reminds me of those fans who blame a world class GM for all the mistakes of past (and present) management.
Alan's job is hard as hell and unlike the 'anointed boy' that preceded him, Mulally has actually been independently successful.
The guy built a team that took a declining company, and made it back into a powerhouse. When I say team I mean ALL of Boeing.
Another thing you should consider is that this is one of the very few guys who has a fantastic understanding of the 'back end' of the business. Logistics, purchasing, transport, standardization of parts and processes, and corporate engineering may not be the shangrila of automotive fashion. But they are critical to success of any large company. The only other fellow I'm aware of in the auto industry who has excelled at turning around a large auto company in dire need of these skills is Ghosn.
So far the guy has eliminated 13 parts plants, sold off Aston Martin, done very well with the media, told the truth about his own former car preferences (which takes sincerity and guts), and realizes that Ford's old name stable indeed has continuity and cache with much of the general public.
He's fighting the good fight. He doesn't prance around on a white horse and spew forth MBA BS like his predecessor. He solves problems and realizes what those problems are from a cultural and organizational standpoint. His work at Ford is akin to what Bill Parcells had to do with the NY Giants except.
1) He has to change the structure
2) He has to change the culture
3) He has to change the product
As you can already tell, I'm rooting for the guy.
American style management is the heart of the problem. Executives who know nothing about product. The real reason the Japanese, Koreans and Europeans are doing better, their managers are product people. The lower executive pay of the competition keeps their egos in check, which is always a problem with Detroit.
If the Ford family wants to survive, maybe they should search Japan/Korea for their next CEO. Pay him $1M per year. Then as the Japanese do, eliminate privileged parking and cafeterias and special bonuses for management – and then be in a position to ask the UAW for shared sacrifice.
The treatment of the American CEO as true royalty is disgusting and counter productive.
American style management is the heart of the problem.
You mean they aren't from a different gene pool?
shamu
Love the content, but I have to agree with other posters who've complained about the comments section putting newer comments first instead of last- its' a lot harder to follow the interactions and exchange of ideas between posters when you have to scroll bottom to top. too bad, because the give and take is an excellent feature of our little community.
edgett
April 6th, 2007 at 12:13 am
Any guesses as to how much Toyota's CEO makes? How about Honda or perhaps BMW? Successful companies all, but executive compensation has little to do with it. The guys at Toyota, Honda and BMW are there to make a difference, and not a "package". I'm sure it was hard luring Big Al away from Boeing, but it says very little about Ford's past that they were unable to come up with a great leader from within. And the cars are still, um, also-rans in the marketplace.
Executive "compensation" in the U.S. has little to do with performance and is all about screwball tax and accounting rules that tie stock price and compensation to short term gains in the market. Value? Don't look to Ford.
I'm very hopeful that, "package" notwithstanding, Mr. Mullaly accepted the job from Bill Ford because he thought he might make a difference. Sadly, he signed on as chief surgeon after the patient was already terminal.
jerry weber
We all dance around the issue of exec compensation in the US by comparing it to other execs and sports figures. The point is the entire system is broken. Not to sound socialistic but it is hard to enlist a do or die mentalities down in the trenches if you live in a robber baron nether world far removed from them. The European model (not always followed) with their 30 to 40 times factory worker salary for CEO's was rooted in a feeling of unity of management with labor. Putting a union person on the board was meant to cement that bond. None of this exists here today, and stoiclly, the modern American worker walks the plank into oblivion dissolusioned with a system that offers no real partnership with the "company".So no matter what these people earn, it looks like peanuts compared to the top eschelon and they are resentful. I don't know if capitalism is capable of balancing this problem, but I do know that some foreign companies especially the Japanese have much more esprit des corps in their workforce. They also have a loyalty to those workers for life, it goes both ways. When labor and management fight over the spoils as they will this summer at UAW talks, the public and the company itself lose.
windswords
About the executive compensation of Japanese automakers: Not all compensation is cash. Now this is what I have heard from other sources, I can not verify it. Hopefully some of you who have the wherewithall (and the time) can look this up. Japanese executives compensation consists not only of pay but things like rent free living at company quarters, paid for membership at exclusive golf clubs (I have heard that becuase of the cost of land in Japan, thses memberships are way more pricey than anything we have here in the US or Canada), and a host of other "freebies". When you add them up I'm sure the Japanese exec makes less than his American counterpart, but not 30 times less or whatever.
This is off topic for this editorial but – as for comments I've heard that Toyota paid their US employees more than UAW – in actual cash yes. But since the benefit package has an actual dollar amount assigned to it, when you add the benefits into the mix the UAW guys still come out on top. Their health is worth more, their retirement contributions etc. Also remember this was due to a bonus paid to Toyota workers. Bonuses come and go, believe me I know. Two companies I worked for were giving out nice bonuses (the last one gave me $11,500 one year). Both were profitable. Both REDUCED the bonus amount the following year, because they wanted to save money. Again they were making money, not in distress. There is nothing to stop Toyota from not paying a bonus next year or any year, even if they make money.
I work in a highly technical field and I get paid well for it. At my last job I was making just under 70k. Not bad after 20 years in my field, but not great either. My company had a very good bennies package, better than most companies in the industry. They gave us a report of what our salary would be if we were given the money in pay instead. My pay would have been something like $96k. The biggest part? Retirement. This firm matched a 401k and paid a pension. That's why you have to look at TOTAL compensation. That's why you should not believe the teachers unions when they bellyache about how little paid they are. After you figure in their gold plated bennies plus the fact that they work 10 months out of the year at most (summer school is extra pay and many of them have other jobs during the summer) they don't do too bad at all. Plus they have job security we can only dream of. I witnesed all this up close because my mom was a teacher for 26 years (and retired early).
Windwords,
I have to agree with you, being a teacher is a good job. If a teacher has never been in the dog eat dog real world, they just do not understand how well they have it. The average engineering, accounting or computer science grad will be forced to relocate and work on average for 4-5 companies during their career. Teachers also get a lot of satisfaction as they see the results of their work daily. When you factor in their health care and pensions, they are doing well. In general they have excellent job security. Starting pay is low, but with masters degree and 10 years, their pay is not bad. Two married teachers is the best deal going, as they can have nice long vacations together in the summer.
Matt51,
I knew such a couple, both were teachers in NJ. He was a music teacher and besides his pay he made good money on the side giving lessons, doing weddings, etc. They travelled all over the place in the summer. I don't want anyone to think I'm against what they make, the point I'm making is that pay is not the only part of compensation. If you are going to report stock options as pay (even though the money isn't realized until you sell it) and count it as part Alan's or anyone elses pay then it's unfare for the same news media to say the factory worker makes $25/hour and not mention the paid holidays, vacation, health, retirement, etc. All of this costs money. As for the Japanese execs, they also get payment other than cash. I hope someone digs around and finds out what their true compensation is.
What is with this reverse polish notation. I feel like I am using an HP calculator. You can't have the editorial read from top to bottom and then the comments read from bottom to top it's making me dizzy. I do like the fact it is now broken up and not all on one page. Now just make it read ALL top to bottom like everything else in the english language.
Lumbergh21
Totally off topic, but sometimes while I sit in my cubical writing one more technical report just like the last one, I wish I had become a teacher as well. I had a Chemistry Professor in college point out how great it was to be a teacher and get at least three months of vacation each year (over two continuous months during the summer, a minimum of 9 holidays in addition to Christmas break and spring break). Add in the great retirement and medical benefits that a typical public school teacher gets and it is really a pretty sweet job-except for the kids, the parents, and the school board ;-).
On topic, I don't begrudge Mullaly taking what Ford was offering (or any other top exec, athelete, or entertainer for that matter). The problem as I see it is the willingness of the boards of directors at these large companies to pay these outrageous salaries. In my mind it smacks of elitism that they seem to think that this is such a difficult job that only a select few would be able to handle it; thereby, driving up the wages for these select few. In reality, what proof have we seen over the past several decades that would indicate that the executives making these skyrocketing wages would do a better job than a line manager might?
Landcrusher
The executive compensation thing is upsetting to many people, at least me, because it doesn't appear to be that tied to success. It's especially not well tied to long term success.
The idea that successful managers will not be attracted unless they are guaranteed huge incomes is just stupid. Successful managers should be, and are, willing to be paid only for success.
Perhaps the problem is that the boards can't figure out how to write a contract that only pays well for success. At any rate, this problem needs to go away really soon or the government backlash will hurt our country.
Whenever you have the opportunity, point this out to people who can do something about it!
Maybe, just maybe, Big Al's going to take a pay cut as the UAW negotiations get started. "See guys, we've all got to pitch in."
Granted, he's got a good start on padding his nest, but if he takes a cut to $20M or even $10M, no one can complain that he's not doing something to cut expenses.
Maxwelton
God, this back to front comments thing is lame. "Top posting" is only interesting to neck beards who fiddle with Linux systems.
People love royalty. "Rock star" CEOs are just another form–just look at some of the fawning in this thread, even. There is zero way to justify spending $30M on a dude to sit in an office, or $62M for he and his five buddies to do so.
There is no way Toyota is providing more than an extra million or two to their CEO over his pay. $2M is a LONG way from $30M.
Remember, this is an extremely troubled industry, not a cash-printing operation.
ttilley
Lumbergh21 wrote: "On topic, I don't begrudge Mullaly taking what Ford was offering (or any other top exec, athelete, or entertainer for that matter). The problem as I see it is the willingness of the boards of directors at these large companies to pay these outrageous salaries."
The problem at companies with a long-term CEO seems to be that the board is appointed by…the CEO.
As for Ford and Mullaly's non-performance-based compensation…I have no idea what the Ford family drinks before making decisions, but I'd like to try some of it.
taxman100
A lot of executive compensation packages is based upon old accounting and reporting requirements. When Congress limited the tax deductibility of executive salaries, companies came up with ways to shovel compensation to execs in ways that were deductible.
Ditto on financial reporting requirements – they came up with new ways to shovel money to execs that could be buried in the financial statements.
Most Board of Directors are made up of CEO's, or former CEO's, of other companies. It is the ultimate "old boys" network, with absolutely no incentive to keep pay reasonable – the average shareholder has very little say on what takes place.
What is the average compensation package of an NBA player vs. the average compensation package of a Fortune 500 CEO? There is fewer NBA players, but I bet the CEO's will be higher.
As a former resident of Japan, I can assure you that after all types of compensation is valued and considered, Japanese CEO's make a shitload less than their American counterparts. Make no mistake, though, they are still well rewarded.
Notice I said Japanese. This is not a Honda vs Ford thing, nor a Toyota vs GM thing. This is the difference between two different cultures. Not corporate cultures but national cultures. America values personal success and individual achievement. Big Al pulled in 30 mil? Good for him. He is successful.
The CEO of Toyota likely started with Toyota as his first job out of university and almost literally eats, drinks and sleeps Toyota.
One will never see this kind of culture in America. To say that Ford needs to change its corporate culture is missing the point, I believe. The problem is much more encompassing than that.
Robert – let me put in my vote for the back-to-front comments. it is far easier to read a thread when it is back-to-front. And for those of us who have so much free time on our hands that we might look at the site two or three times a day, we can stay current with the many truly intelligent comments offered in response to your frequently provocative editorials.
Thanks for a great site, and, Big Al – we're all watching to see if you are actually good enough to yell "Clear!" when you try to resuscitate Ford. Godspeed to you, man, "package" and all…
The only correlation that exists is that when the company does badly, it's excessive, and when the company does well, it's stratospheric.
The sad thing is rather than waning, it's a trend that has filtered down to even smaller companies. I used to work for a company that grossed about 10 million/year. The pres/general manager had a 5 year contract at @200k a year. For two years he made one catastrophic move after another, driving us to the brink of bankrupcy. We were bought out, and the company shrank from 60 to 20 people. The aforementioned pres was let go as well…after being paid the balance of their contract and a little extra in lieu of benefits. So, half a million severance for doing a terrible job for two years? At a company with revenue of $10 million a year? Unfreakingreal.
I am only 40, and have become almost totally disillusioned with how most companies are run.
kjc117
How can the Mustang not sell? It has no competion unless you include the Dodge Charger because the although the 350Z, RX-8, and S2000 have FR set up that market segment does not cross over.
Not only is Ford's market share shrinking so is their market segment. Many individuals under 30 will not just purchase a car based on past glory(psst..TTAC story lead).
If the all American true blue Mustang can not sell then Ford is truely doomed.
tsofting
Dream 50: "America values personal success and individual achievement. Big Al pulled in 30 mil? Good for him. He is successful."
The first 3 sentences I can agree with, the 4th is yet to be proven. The jury is definitely still out on how successful Mr. Mullally is. Whether he can transform Ford into a viable and competitive automaker remains to be seen. If he really had so much faith in his own skills as a turnaround artist and manager, he could have made a difference to the whole Ford-project by starting out with a somewhat more down to earth salary (or "compensation" as it is called these days). Remember when Lee I. signed up with Chrysler for a buck a year? That bought him a lot of goodwill both among employees and the political landscape. Alan, well he seems to be just like the rest of the hired hands of industry; take the money and run. Tell the guy who just got his pink slip, and usuccessfully tries to sell his house in a depressed housing market in order to move on, that Alan is in it for anything but as much money in as short a time as possible, and you'll see this guy laugh, probably for the first time in a long time. I am a firm believer in the capitalist free-enterprise system, and am convinced it has brought prosperity to all of us, but it isn't always smart to do something just because it is possible, you have to see your actions in a somwehat bigger context. It is obvious that Al does not have the required grasp on reality to understand this, and that is just too bad!
Not quite related to exec compensation, but just picked up on this news this morning 'Ford is recalling 527,000 Escape sport-utility vehicles because of a problem in the antilock braking system that could cause fires' Just what they needed.
Sherman Lin
If he saves Fords bacon he's worth the money but if Ford goes down for the count would he have been worth 50 thousand dollars?
Everyone complains about domestic's executives compensation amounts but forgets or ignorant of the fact their goal is to reduce costs and maxiumize profit. They could care less if their product is a POS.