As the aptly named Cerberus (in Greek mythology, the “demon of the pit,” “hound of Hades” ) picks over the corpse of Chrysler, it’s a good time to reflect on the complete disconnect between auto industry CEO compensation and auto industry CEO performance.
While Chrysler was bleeding white to the tune of $1.6 billion (in 2006), corporate honcho Bob Lutz raked in $8.4 million. If that’s not enough to get your back up, consider that it’s actually more than twice what Lutz was paid the year before - when his reported salary was a mere $3 million per annum. So while Chrysler’s earnings were plummeting, the pay of its chief officer was skyrocketing. How does that make sense, exactly?
Then there’s GM’s Rick Wagoner - who got $10.2 million in 2006, the same year GM lost more than $2 billion.
It’s even worse over at Ford.
CEO Alan Mulally took (use of the term “earned” would be an obscenity in this context) home $39.1 million for the four months’ “work” he performed during 2006. This while that Ford lost $12.7 billion - the worst loss in its entire 104 year history. (If Mulally gets canned - for whatever reason - his severance package is reportedly worth $27.5 million. )
Meanwhile, out in the real world, when a regular working stiff doesn’t live up to expectations - or his work is shoddy - he gets the boot. And unlike golden parachute CEOs, his “severance package” won’t be enough to keep him in kippers for the rest of his life, either. If he’s lucky, he’ll get two week’s pay - at most, perhaps a couple thousand bucks.
So where’s the outrage?
How come no one’s noticed (or seems to care) that the guys running the U.S. automobile industry into ruin are being compensated as though they’d somehow managed to turn their respective Titanics around? Probably no one would have a problem with a guy like Lutz carting home wheelbarrows of cash - if the company he headed was bringing in truckloads of boodle at the same time. We’re not Marxists - and most of us think a person who busts his butt and achieves great things deserves whatever he’s paid.
It’s not a question of “envy” or “hatred of the rich.”
It’s revulsion at the iniquity of a system that rewards do-nothings and failures so gratuitously while shafting the average guy so mercilessly.
Today, the average corporate CEO takes home something like 500 times what the average worker earns. In the 1960s - when Detroit’s Big Three were still profitable and together held more than 90 percent of the entire U.S. new car market - the ratio was a mere 40 times the average worker’s pay.
Is there any possible scenario under which an executive who presides over billion-dollar losses can be said to have “earned” his compensation? The company’s losing market share; shareholder value plummets - but there are no consequences for the men at the top. Indeed, they are rewarded - generously - for their “services.”
This kind of thing does not occur in Europe or Japan, it’s worth pointing out. The German head of Daimler Ag (the parent company of what was, until this week, DaimlerChrysler) was paid a fraction of the compensation ladled out to Robert Eaton - Chrysler muckety-muck at the time of the “merger of equals” - whose total take topped $70 million in cash and stock. U.S. CEOs take in on the order of 22 times what their counterparts earn in Japan (and 17 times what their European counterparts are paid).
And let’s not forget - Toyota and Honda (and Mercedes and BMW) actually make money selling cars. This is a distinction neither Chrysler nor Ford nor GM can claim at the present time.
Of course, life’s not fair. “Connected” people have advantages and get material and other benefits that other people (even when more deserving) often don’t. It’s the way the world works. And our system allows it. Even encourages it.
That said, if we don’t get a handle on this situation, the eventual results could involve more than the deaths of venerable brands like Chrysler (and even Ford and General Motors). At some point, millions of quietly screwed-over average people may tire of their lot - and of having their faces rubbed in the undeserved riches heaped upon corporate losers while they struggle to keep the mortgage paid up.
Our system is based on the implicit idea that merit and work generally pay off - and that incompetence and failure generally don’t. When that ideal is up-ended (brazenly and publicly) the public is going to become increasingly angry. Angry and economically dispossessed people tend to favor harsh solutions.
None of that is good for the country.
Not even if you’re a retired auto industry CEO happily counting your ill-gotten booty in your Gross Pointe McMansion.
The suckers may decide someday they’ve finally had enough.
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