Mulally, Ford Rewarded for Firm's Success

[Sixt9coug]

Finding a good exec in the car industry is hit and miss. The ones that are good, the companies want to keep and the only way to keep them is to make sure they get paid enough.

 

 

Exactly. What would Chrysler pay to have someone like Mullaly at the helm? Or GM?

[jpd80]

Exactly. What would Chrysler pay to have someone like Mullaly at the helm? Or GM?

The company philosophy and culture at Chrysler and GM would never allow him to be successful at either.

Bill Ford and senior executives embraced change, that was the only way an outsider could fit in....

[Mark B. Morrow]

How is it that American executive pay got so out of whack versus the rest of the world.

 

Lets look at the auto industry. What is the most successful automaker? It would be hard to argue against Toyota over the last ten years. The president and entire Toyota board of 38 members in 2009 made less than many American CEOs.

 

"The $15.95 million in total remuneration for Toyotas board for the year ending in March was the lowest in a decade and $1.5 million less than the top executive at Ford, Alan Mulally, made last year."

 

http://www.nytimes.com/2010/06/25/business/global/25toyota.html

 

Toyota had a pretty bad year so what happened to executive pay?

 

"At its annual shareholders conference, Toyota disclosed that it had docked the pay of its top management by 10 percent to help atone for the companys recent safety problems, which have led to the recalls of more than nine million vehicles worldwide. The president, Akio Toyoda, and other top executives also forfeited bonuses for the second consecutive year."

 

Look at GM vs Toyota for 2007.

 

GM lost $38.73 Billion its CEO Rick Wagoner was paid $14.4 million

 

Toyota made $13.93 Billion its CEO Katsuaki Watanabe made $900,000

 

http://bigthreeauto.procon.org/

 

If it makes sense to outsource American jobs to foreign workers who are willing to do the job for less, why not apply the same logic to executive pay.

 

It simply can't be argued that the Toyota board couldn't run GM. They have been kicking GM's ass for nearly 20 years.

 

If American Workers are expected to compete against the world so should the management.

Edited March 13, 2011 by Mark B. Morrow

[F250]

How is ti that American executive pay got so out of whack versus the rest of the world.

 

If American Workers are expected to compete against the world so should the management.

 

Outstanding.

[Ron W.]

Mark B. Morrow, on 12 March 2011 - 03:54 PM, said:

 

How is ti that American executive pay got so out of whack versus the rest of the world.

 

If American Workers are expected to compete against the world so should the management.

 

Outstanding.

 

 

Well that make two of us that agree with you...

[RangerM]

If American Workers are expected to compete against the world so should the management.

Five years ago Toyota Motor stock was $108.20. Friday's close was $85.65.

 

Five years ago Ford was $7.81. Friday's close was $14.36.

 

Fixing up Ford

This is a man who lives less than three miles from his office, arrives there each morning at 5:15 a.m. for a 12-hour workday, and does so with smile. At 63, he still gets enthusiastic about tackling big jobs. "I've always wanted to do something important, and it had to be in a big organization," says Mulally.

Edited March 13, 2011 by RangerM

[Mark B. Morrow]

Five years ago Toyota Motor stock was $108.20. Friday's close was $85.65.

 

Five years ago Ford was $7.81. Friday's close was $14.36.

 

Fixing up Ford

 

Five years ago Toyota's board made even less than they made in 2007. They all took a pay cut for the company's poor performance and lost their bonuses.

 

 

I certainly don't mean to single out Mulally here. I agree that he has been very good for Ford. Without him Ford would very likely have been on the bailout with GM or worse. $56 million is 3 times Toyota's Executive board payroll. This inflation of executive compensation started long before Mulally arrived at Ford. Should he be paid more than the failures at GM? Absolutely.

 

The problem is with the system at large. Did American companies have trouble attracting talented people when CEOs made 50 times what average workers made? No, they didn't. People still wanted to be CEOs in the '50s and '60s. The top jobs still attracted the top talent. The incredible inflation of C-level salaries raised the incompetent as well as the very competent. The advent of basing bonuses on short term results and Golden Parachutes all but eliminated concern for the long term benefit of decisions. It became SYNIGM (Screw You Now I've Got Mine).

 

The point of my post is that Most CEOs didn't create the companies they run and many have very little ownership interest in their firms. They are employees, paid to do a job, just like the guy putting doors on cars on the line. Yes they are better educated and hopefully more skilled. But they are employees in a world market. So they should be held to the same competitive standard against world talent as they demand of their line workers.

 

There is no reason why CEOs can't be outsourced for comparable talent at significantly lower cost. Ultimately, the savings belongs to the owners of the company, just like it does with all other employees. The justification and logic are exactly the same.

Edited March 13, 2011 by Mark B. Morrow

[ausrutherford]

How is it that American executive pay got so out of whack versus the rest of the world.

 

Lets look at the auto industry. What is the most successful automaker? It would be hard to argue against Toyota over the last ten years. The president and entire Toyota board of 38 members in 2009 made less than many American CEOs.

 

"The $15.95 million in total remuneration for Toyota’s board for the year ending in March was the lowest in a decade — and $1.5 million less than the top executive at Ford, Alan Mulally, made last year."

 

http://www.nytimes.com/2010/06/25/business/global/25toyota.html

 

Toyota had a pretty bad year so what happened to executive pay?

 

"At its annual shareholders’ conference, Toyota disclosed that it had docked the pay of its top management by 10 percent to help atone for the company’s recent safety problems, which have led to the recalls of more than nine million vehicles worldwide. The president, Akio Toyoda, and other top executives also forfeited bonuses for the second consecutive year."

 

Look at GM vs Toyota for 2007.

 

GM lost $38.73 Billion its CEO Rick Wagoner was paid $14.4 million

 

Toyota made $13.93 Billion its CEO Katsuaki Watanabe made $900,000

 

http://bigthreeauto.procon.org/

 

If it makes sense to outsource American jobs to foreign workers who are willing to do the job for less, why not apply the same logic to executive pay.

 

It simply can't be argued that the Toyota board couldn't run GM. They have been kicking GM's ass for nearly 20 years.

 

If American Workers are expected to compete against the world so should the management.

 

And where is that Toyota CEO today? O thats right...he is gone!

[Mark B. Morrow]

And where is that Toyota CEO today? O thats right...he is gone!

 

So is Rick Wagoner and his replacement. They just left with a lot more money. The new CEO at Toyota and his entire board are still making less than a third of Mulally's 56 million.

[FordBuyer]

So is Rick Wagoner and his replacement. They just left with a lot more money. The new CEO at Toyota and his entire board are still making less than a third of Mulally's 56 million.

 

Yep, American executives are not only richly rewarded for success beyond belief, but they are richly rewarded with failure in the form of huge compensation packages as I'm sure Nasser received after running Ford into ground. They basically raid the company's treasury and then we wonder why the company stock is so diluted. I'll never understand why any individual needs hundreds of millions of dollars to live on, then more hundreds of millions to leave the company and gold plated retirement after that. Michael Eisner of Disney is a case in point. And the Disney family hated him! That dude raided the Disney treasury to the tune of way over a billion dollars. He is the crux of the executive compenation problem.

[RangerM]

Five years ago Toyota's board made even less than they made in 2007. They all took a pay cut for the company's poor performance and lost their bonuses.

 

 

I certainly don't mean to single out Mulally here. I agree that he has been very good for Ford. Without him Ford would very likely have been on the bailout with GM or worse. $56 million is 3 times Toyota's Executive board payroll. This inflation of executive compensation started long before Mulally arrived at Ford. Should he be paid more than the failures at GM? Absolutely.

 

The problem is with the system at large. Did American companies have trouble attracting talented people when CEOs made 50 times what average workers made? No, they didn't. People still wanted to be CEOs in the '50s and '60s. The top jobs still attracted the top talent. The incredible inflation of C-level salaries raised the incompetent as well as the very competent. The advent of basing bonuses on short term results and Golden Parachutes all but eliminated concern for the long term benefit of decisions. It became SYNIGM (Screw You Now I've Got Mine).

 

The point of my post is that Most CEOs didn't create the companies they run and many have very little ownership interest in their firms. They are employees, paid to do a job, just like the guy putting doors on cars on the line. Yes they are better educated and hopefully more skilled. But they are employees in a world market. So they should be held to the same competitive standard against world talent as they demand of their line workers.

 

There is no reason why CEOs can't be outsourced for comparable talent at significantly lower cost. Ultimately, the savings belongs to the owners of the company, just like it does with all other employees. The justification and logic are exactly the same.

Problem is you have the government (YOUR GOVERNMENT) passing laws with the goal of limiting CEO pay. Specifically, Section 162(m) of the IRS code made all executives' pay beyond $1 Million non-deductable expenses. An important exemption of this law is performance-based compensation. Stock options are a (the?) major source of that compensation.

 

You could argue that GM executives didn't perform. I would say they did. They got your government to put your money into their failing businesses. I'd think it makes no difference to the executive if the money comes from sales or your tax dollars.

 

You make an important point when you say, Most CEOs didn't create the companies they run and many have very little ownership interest in their firms, except that they do have an interest in the price of the stock options they own. My guess is Mullaly has been successful because he seems to CARE about Ford Motor Company, and that is the "ownership interest" that would support your statement.

 

Bothering to give a crap about the place you work would seem to be Job 1 in running a successful business. At the other end, if you have employees who couldn't care less whether or not their employer goes bankrupt, the CEO is by himself, and likely won't be successful no matter how much he cares.

[FordBuyer]

An important exemption of this law is performance-based compensation. Stock options are a (the?) major source of that compensation.

--------------------------------------------------------------------------------------------------------------------------------------------------------

 

There you go....dilute the hell out of the stock by offering millions upon millions of shares to your many executives that add up to hundreds of millions of dollars putting them into billionaire status in some cases over their years of service to company. No wonder shareholders are so pissed off and why there are proxy fights every spring with rebellion votes growing each year. How about offering a CEO and top executive an attractive salary, and bonus salary if they hit certain cost, revenue, profit, and stock price numbers plus positive cash flow numbers. Company stock price would do much bettter if executives weren't awarded millions of shares every year in increasing numbers. They give shareholders a 4% raise in dividends and reward themselves untold millions. If this American explosion of stock compensation doesn't slow down soon, the average mid to big company CEO will be inching closer to billon dollar status in one year soon. IMO, company executives should have to buy the stock at same price as us. And company match should be same as salaried personnel. If a top CEO and his top people can't live on $5-$10 million/year, then too damn bad. Start your own frickin company and become a billionaire if upwards of $10 million/year isn't enough. God knows there are enough robber barrons out there stealing the publics money.

[theDuff]

... and bonus salary if they hit certain cost, revenue, profit, and stock price numbers plus positive cash flow numbers.

 

Isn't the stock price directly related to this?

[xr7g428]

Mark, You of all people know that Mulally DID NOT GET PAID $56 million. He got stock options, that 1. Could have very easily been worthless, that 2. Cost Ford a tiny fraction of their ultimate value. Had you bought the same options at the same time, you would had the same results. You are just stirring the pot to further your agenda of forced income redistribution. You are just doing your best to gin up resentment of those that are more successful than average. You know nothing of what Mulally does each day, nothing of the sacrifices he makes, nothing of the risks he accepts, yet you are willing to stand in judgment of the fairness of his income.

 

How about we all talk about the fairness of attorney compensation. My attorney bills me at $450 and hour, mostly for work done by his Paralegal staff. Is that fair? That is nearly 58 times the minimum wage. Scandalous!

[ausrutherford]

So is Rick Wagoner and his replacement. They just left with a lot more money. The new CEO at Toyota and his entire board are still making less than a third of Mulally's 56 million.

 

Is that Toyota figure including stock compensation? much of the mulally figure comes from stock options. Something tells me the Toyota CEO is paid alot more than that. Not to mention that he is a family member for the founder!

[Mark B. Morrow]

Is that Toyota figure including stock compensation? much of the mulally figure comes from stock options. Something tells me the Toyota CEO is paid alot more than that. Not to mention that he is a family member for the founder!

 

 

As a member of the Toyoda family and grandson of the founder, I would think Akio Toyoda has a significant wealth and an interest in the company like Bill Ford does at Ford.

[Mark B. Morrow]

Mark, You of all people know that Mulally DID NOT GET PAID $56 million. He got stock options, that 1. Could have very easily been worthless, that 2. Cost Ford a tiny fraction of their ultimate value. Had you bought the same options at the same time, you would had the same results. You are just stirring the pot to further your agenda of forced income redistribution. You are just doing your best to gin up resentment of those that are more successful than average. You know nothing of what Mulally does each day, nothing of the sacrifices he makes, nothing of the risks he accepts, yet you are willing to stand in judgment of the fairness of his income.

 

How about we all talk about the fairness of attorney compensation. My attorney bills me at $450 and hour, mostly for work done by his Paralegal staff. Is that fair? That is nearly 58 times the minimum wage. Scandalous!

 

Mulally didn't net $56 Million but that was the gross value of his compensation. Where it came from is not relevant. He didn't buy the options, Ford provided them as part of his comp package.

 

I'm not questioning Mulally's compensation in relation to the American executive compensation scheme. I'm questioning the entire system that has ballooned executive pay over the last 30 years that bears no relation to the pay scales in the economy as a whole and that isn't dependent on success, particularly long term success. When compared to other U.S. exces, Mulally certainly isn't overpaid.

 

There are plenty of execs who are overpaid even by U.S. standards because they have been abject failures. They still leave with millions.

 

Shareholders really don't have much of a say in executive compensation matters. They own the company but the issue of what the CEO gets paid is out of their control.

 

I believe that Mulally's stewardship of Ford has provided Long Term benefits, eventhough I don't think the stock performance will continue at the rate of the last 2 years. Mulally has changed the company's culture, something that even bankruptcy didn't do at GM.

 

You're right that there has been a redistribution of wealth. But not the way you think. Over the last 30 years great wealth has been redistributed UP. As Warren Buffett observed, "There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning."

 

My question is when we are telling workers that they have to compete with low paid workers around the world, why shouldn't execs be held to the same standards? If outsourcing can be justified can't it be justified at the top as well as at the bottom?

 

As for your attorney, you have lots of choices. I don't bill out at $450/hr. When I worked for attorneys who did, my work and the work performed by paralegals was billed at the associate or paralegal rate. It is unethical to bill the attorney rate for work performed by a paralegal.

[akirby]

An important exemption of this law is performance-based compensation. Stock options are a (the?) major source of that compensation.

--------------------------------------------------------------------------------------------------------------------------------------------------------

 

There you go....dilute the hell out of the stock by offering millions upon millions of shares to your many executives that add up to hundreds of millions of dollars putting them into billionaire status in some cases over their years of service to company.

 

You actually think that when executives exercise stock options that the company just issues more stock? OF COURSE NOT! Stock option contracts and the actual stock is bought and sold on the open market. There is no dilution of stock.

[Maislebandit]

If Federal and State government employees are allowed to unionize... why is the active duty military prohibited?

 

The answer to that is why no government employee should be allowed to unionize.:busted:

 

 

 

Every year, the union at the school corp my wife works at requested that the USAF JROTC high school program be cut just because my wife and the colonel she works with refuses to join the teachers union.:slapfight:

 

 

This has been going on for the past 9 years since the program started.

 

One more year she will be vested in the State Teachers' Retirement Fund.

 

Federal and state employees are not government property. An enlisted person OTOH is. That is why they cannot unionize, amongst other things that are taken for granted by the rest of us.

[mettech]

Federal and state employees are not government property. An enlisted person OTOH is. That is why they cannot unionize, amongst other things that are taken for granted by the rest of us.

 

 

You base this statement on what?

 

[grbeck]

The problem is with the system at large. Did American companies have trouble attracting talented people when CEOs made 50 times what average workers made? No, they didn't. People still wanted to be CEOs in the '50s and '60s. The top jobs still attracted the top talent. The incredible inflation of C-level salaries raised the incompetent as well as the very competent. The advent of basing bonuses on short term results and Golden Parachutes all but eliminated concern for the long term benefit of decisions. It became SYNIGM (Screw You Now I've Got Mine).

 

Just out of curiosity...did Henry Ford II take a salary when he headed Ford Motor Company after World War II, through 1980? Granted, his name WAS on the building, but he was also obviously an employee of the company, and it was no longer solely owned by the Ford family after 1956.

 

The point of my post is that Most CEOs didn't create the companies they run and many have very little ownership interest in their firms. They are employees, paid to do a job, just like the guy putting doors on cars on the line. Yes they are better educated and hopefully more skilled. But they are employees in a world market. So they should be held to the same competitive standard against world talent as they demand of their line workers.

 

There is no reason why CEOs can't be outsourced for comparable talent at significantly lower cost. Ultimately, the savings belongs to the owners of the company, just like it does with all other employees. The justification and logic are exactly the same.

 

The problem is that this attitude can lead to an Akerson as the head of GM...the government has capped the pay of GM's executive team as a condition of the bailout, and it seems to me that he was installed because he was willing to take the job, and not much else. It's certainly not because he knows a whole lot about either cars or the auto industry.

 

If anything, his quote that GM needs to cut $10,000 in costs out of the Volt (if he did say this) reeks of the old beancounter mentality that forced last-minute cost reductions in the 1960 Corvair and 1971 Vega - two ambitious projects that were supposed to show GM's engineering prowess and push back foreign interlopers, but were badly hobbled by last-minute cost-cutting. We all know how those turned out...

 

I agree with you that there is an "old boys' and girls' club" mentality among boards that allows weak performers - or outright failures - to reap huge rewards while leaving the scene of the disaster. I would also add that too many CEOs are isolated from the problems faced by average Americans face - including the Americans who buy their products. I doubt that even Alan Mulally, for example, worries about what will happen if the transmission goes on his Ford just after the warranty ends and he still owes two years of payments.

 

Allowing CEOs pay to be set solely by market rates, whether it's a world market or a national one, would still result in some huge compensation packages. Even in a perfect world, where boards are setting compensation packages solely based on performance, there is no doubt that an Alan Mulally would garner a much higher total package than a Rick Wagoner or a Dan Akerson.

[Mark B. Morrow]

Just out of curiosity...did Henry Ford II take a salary when he headed Ford Motor Company after World War II, through 1980? Granted, his name WAS on the building, but he was also obviously an employee of the company, and it was no longer solely owned by the Ford family after 1956.

 

 

 

The problem is that this attitude can lead to an Akerson as the head of GM...the government has capped the pay of GM's executive team as a condition of the bailout, and it seems to me that he was installed because he was willing to take the job, and not much else. It's certainly not because he knows a whole lot about either cars or the auto industry.

 

If anything, his quote that GM needs to cut $10,000 in costs out of the Volt (if he did say this) reeks of the old beancounter mentality that forced last-minute cost reductions in the 1960 Corvair and 1971 Vega - two ambitious projects that were supposed to show GM's engineering prowess and push back foreign interlopers, but were badly hobbled by last-minute cost-cutting. We all know how those turned out...

 

I agree with you that there is an "old boys' and girls' club" mentality among boards that allows weak performers - or outright failures - to reap huge rewards while leaving the scene of the disaster. I would also add that too many CEOs are isolated from the problems faced by average Americans face - including the Americans who buy their products. I doubt that even Alan Mulally, for example, worries about what will happen if the transmission goes on his Ford just after the warranty ends and he still owes two years of payments.

 

Allowing CEOs pay to be set solely by market rates, whether it's a world market or a national one, would still result in some huge compensation packages. Even in a perfect world, where boards are setting compensation packages solely based on performance, there is no doubt that an Alan Mulally would garner a much higher total package than a Rick Wagoner or a Dan Akerson.

 

 

I don't know if Hank the Deuce took a salary. If he did it wouldn't have been anything like CEOs get paid today. Of course, prior to 1956 Ford was still privately held and HF II probably didn't get a salary in the dark days before '49. His homecoming was a matter of family duty.

 

I find it hard to believe that there was no one competent at GM in the ranks or outside who couldn't or wouldn't have taken the job at the restricted salary. Hell, Iacocca took on the mess at Chrysler for $1 per year and stock. There were undoubtedly some people already at GM who could see the problems and the way out. I don't see Akerson as a star CEO anywhere near the stature of Mulally .

 

I think a lot of this wage inflation among CEOs started in the '80s when boards were very compliant with CEO demands and salaries became a way of keeping score in that tight little world.

 

I just don't see the justifiction for salaries in the tens of millions for the job that foreign execs do successfully for substantially less money. It is an artificial market when the owners of the companies have very little to say about CEO pay.

 

I do like the reported stories that Mulally drives everything Ford makes from the bottom up and that he has spent some time out in the field. The isolation of corporate leaders is very bad. You must know your customer and your workforce to understand them. I hope he continues to get out of the bubble of the exec suite.

[Maislebandit]

You base this statement on what?

 

 

DD form 4/1

 

Number 9 of subsection C covers most of it.

 

[grbeck]

I don't know if Hank the Deuce took a salary. If he did it wouldn't have been anything like CEOs get paid today. Of course, prior to 1956 Ford was still privately held and HF II probably didn't get a salary in the dark days before '49. His homecoming was a matter of family duty.

 

Even if he didn't take a salary, he did not live modestly. He was never noted for a spartan lifestyle. If I recall correctly, his daughters' "coming out" parties in the late 1950s were the most expensive and lavish that had been held up until that time.

 

I find it hard to believe that there was no one competent at GM in the ranks or outside who couldn't or wouldn't have taken the job at the restricted salary.

 

It could be that no one wanted the job, and the board, for whatever the reason, didn't trust anyone currently at GM. It could be the lack of compensation, or it could be the fear of GM's corporate culture. It's undisputed that the bailout prevented GM from undergoing any wholesale corporate culture change of the type Ford has undergone. That may be the worst apsect of the bailout.

 

I remember reading that when Chrysler was in a tailspin in 1960-61 because of management scandals (several executives had interests in Chrysler suppliers, and were allowing the use of substandard parts in exchange for kickbacks) and wacky styling, Chrysler board members approached both Iacocca at Ford and Ed Cole at GM about running Chrysler, and both said "no." They finally settled on Lynn Townsend, who was described as the only person willing to take the job.

 

Remember that Iacocca only joined Chrysler in 1978 after he a was abruptly fired by Henry Ford II. It's hard to recruit people to a company looked upon as a loser, or as the weakling in a field of strong competitors. GM has to compete with Ford, Toyota, Honda, Nissan, Hyundai , Mercedes and BMW.

 

Hell, Iacocca took on the mess at Chrysler for $1 per year and stock. There were undoubtedly some people already at GM who could see the problems and the way out. I don't see Akerson as a star CEO anywhere near the stature of Mulally .

 

I don't believe Iacocca agreed to be paid $1 when he joined Chrysler. He received a normal salary and benefits package when he joined the company in late 1978, but then agreed to take $1 when it became apparent that Chrysler needed concessions from the UAW and federal loan guarantees to survive. When he joined Chrysler, he didn't believe that things were that bad, or that federal help would be needed...and neither did Chrysler's management! One of the things that shocked him was that the corporation often had no idea of how it was performing! But when the Iranian Revolution disrupted the oil market in the spring of 1979, sales of trucks, vans and larger cars tanked, and Chrysler was in danger of going bankrupt.

Edited March 15, 2011 by grbeck

[Project-Fairmont]

Mulally is not merely a highly paid executive (overpaid to most on this site). He is a one in million persona that makes a difference. When you consider, how he manages and inspires your favorite auto company, what price do you put on that success? Can the company save a few million (and won't make difference in your pay) in having someone less capable? A guy like Mulally can work with Congress, Suppliers, Unions, White Collar and Customers and have them believe there is something special going on at Ford.

 

Many European and most Japanese Cos run on concensus, and that is great when you manage success, however in order to be successful, you need a strong leader. When you have a company like Ford that faces high debt, high fixed costs, and better yes, but still lousy customer preception - what price do you pay a proven leader when your future is on the line?

 

Like it or not, and as in Sports, that is the price you pay - sometimes it works sometimes it does'nt. In the case of Mulally and the future of FoMoCo, he is worth it. We should all inspire to be as good as he is, not shame him for his success.

 

Make it a great day!

Edited March 16, 2011 by Project-Fairmont