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The five most senior General Motors (NYSE: GRM) executives, along with the 20 next highest-paid employees, are going to see their cash compensation fall $3.9 million (31%) on a year-over-year basis.
The decision was made by the "independent master" that was appointed to set pay and stock levels for those in charge of companies that have received a majority of the funding from the federal government. GM is not on its own, as top execs at GMAC (the company's financing arm) and Chrysler will see their compensation cut as well.
I think many will agree with me when I say that it is a good thing that this is happening. Remember the outrage caused when companies that received government money felt it was prudent to issue pay raises to the executives that helped cause the financial mess. Is the move too little too late as far as the public is concerned?
Oh, and before we get too happy about the move, GM's CEO Fritz Henderson is going to see his total annual compensation (stock and cash) upped to nearly $5.5 million. Henderson's actual salary will be cut 25% to $950,000 per year, according to unidentified sources. Henderson's current salary is $1.26 million. To comprise the rest of the $5.5 million, Henderson will receive $4.24 million in stock and restricted stock.
So, what have we learned here? The government's pay czar is smart enough to issue more stock and restricted stock so the executives have incentive to make the company succeed. This is a good move, as it keeps the fat cats from sitting on their hands and doing nothing (the proverbial fiddling while Rome burns). There is now incentive for the executives to help push the company higher and make GM (and the others) succeed.
Will this policy translate into success for GM and others? We will find out, but it certainly appears to be a step in the right direction.
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Reader Comments (Page 1 of 1)
10-23-2009 @ 4:33PM
MC said...
How about leading by example? I wouldn't feel better about the government dictating pay and bonuses of companies if they would cut their own pay FIRST, but it would be the thing to do!
10-24-2009 @ 5:16AM
Dan Barnett said...
MC do you have any idea how little Government workers are paid? I thought not. Plus Government workers don't get "stock options" and they constantly have morons complaining that they are overpaid.
Now Mark, my question to you is whether tying the compensation to stock for the executives will merely encourage the manipulations that went into puffing up Enron's stock price at the expense of the underlying health of the company?
10-24-2009 @ 11:32PM
fredricwilliams said...
I'm surprised that so few people are troubled by communist-style government-run companies, or by simple common sense in compensation -- something that politicians and academics can't fathom.
When you cut salaries for all executives, you assure just one thing -- that the most valuable and marketable employees will leave for better jobs. The company will be left with those no one else would hire, and, as a result will be paying too much and getting too little. Cut salaries again and the same thing occurs.
That's why government employees tend to be less competent than those in private industry. Those who stay are not paid spectacular salaries, but a great many are still overpaid given the results they achieve.
And in case you wonder, I was a government employee who left for a higher paying job in industry. I've seen how it works.