Get your Kleenex ready – you’re going to need it when you read this sad story.
General Motors, fresh off a year when it posted a record $7.6 billion profit and regained the title of the world’s largest carmaker, was only able to pay CEO Dan Akerson $7.7 million, including a salary of $1.7 million and more than $5.9 million in stock-based awards paid out over time.
I know what you’re thinking: How can anyone get by on just $7.7 million?
Yet that figure, pitiful as it is, has already become the subject of some debate. Sure, it’s more than triple what Akerson made the year before. He took over as CEO in September 2010 and earned just over $2.5 million, including salary of $566,667 and stock awards totaling about $1.77 million. But as GM pointed out in its proxy filing last week, the millions Akerson was paid just don’t match up with what a CEO of his ilk could be making.
In its filing, GM noted that “the rigid, non-cash approach” forced upon the company as part of the Troubled Asset Relief Program (TARP) could be hurting its ability to keep key employees and stay competitive longer-term:
“We could not have maintained our competitive focus and achieved these important successes without the dedicated efforts and contributions of our employees, particularly our senior management team members, many of whom joined the Company in recent years to assist us in reestablishing our brand dominance,” the proxy filing reads.
“However, appropriately recognizing and rewarding these key contributors and competing with other large, multinational employers to attract and retain fresh talent with critical skill sets is extremely difficult within the compensation constraints imposed by TARP regulations and the directives of the Special Master.”
In particular, GM complained about having to use an unusual stock-based structure instead of regular cash incentives and not being able to pay bonuses to top executives. “An annual bonus that may be earned upon achievement of our annual financial and operating performance goals and individual contribution to the achievement of these goals is one competitive element of compensation that is expressly prohibited. We believe this element is the cornerstone of employee engagement which maintains a critical line of sight between Company performance and individual rewards.”
GM has a point. After all, Ford CEO Alan Mulally made $29.5 million, including $2 million in salary, a $1.8 million bonus, $13.9 million in stock awards and $7.5 million in stock options. The man steering Chrysler back from the brink, Sergio Marchionne, isn’t collecting a salary for his role at the company, but made $19 million as CEO of Fiat, which owns a majority of the U.S.’s No. 3 carmaker. Other CEOs at large multinational firms make even more. (Apple’s Tim Cook led all CEOs last year with a pay package totaling $378 million, almost all of that coming in the form of restricted stock units vesting in 2016 and 2021.)
The median compensation for CEOs of the top 100 American corporations was $14.4 million, according to a New York Times report based on Equilar data. GM uses a set of 23 comparable companies such as Ford, IBM, Boeing and Exxon Mobil to gauge its pay standards. As GM’s filing notes, Akerson’s package puts him “in the lowest quartile of compensation for CEOs of comparable companies.”
Whether or not GM’s concerns are valid, its complaint still comes off as out-of-touch whining at a time when the Treasury still owns 30 percent of the company; the carmaker is still getting government tax breaks; public anger over the federally funded bailouts – including $49.5 million to GM – has not completely subsided; and so many Americans are still concerned about the state of the economy and their own finances.
Has GM’s board somehow failed to notice that the growing gap between the rich and the rest of us has become a hot-button issue, and is bound to stay one at least through the November elections? Whether or not President Obama’s populist push includes making an issue out of CEO pay specifically, big labor already is already attacking the subject. The AFL-CIO recently released it annual “Executive PayWatch” report, with an online database labeled “CEO Pay and the 99%” that lets users look up the 100 top-earning chief executives in 2011.