Barney Frank: Ed Whitacre Is Overpaid, But What Are You Gonna Do?

Edward Niedermeyer
by Edward Niedermeyer

It’s been over ten days since GM’s Bob Lutz took to the local papers to complain that GM’s executives are “way, way, way underpaid,” and its still been less than a week since Ed Whitacre’s $9m compensation package was announced but politicians are only now starting to sit up and take notice. Barney Frank (D-MA) can usually be counted on to give greedy CEOs a good dressing-down, but at this point, Mama Frank seems to have given up on the government-owned automaker’s execs. The Detroit News reports Frank’s mild disappointment thusly:

“I don’t think Mr. Whitacre was going to go do something else” if he got paid less, Frank told reporters this afternoon after a hearing. “He’s having a good time there. I think they way overcompensate themselves.”

Special master for executive compensation Ken Feinberg chimes in to say that Whitacre’s compensation package is “appropriate,” but wouldn’t disclose whether GM’s planned payback of government loans would free it from compensation oversight. All but $1.7m of Whitacre’s annual compensation is in the form of stock that would not be redeemable until an IPO in which the government would sell all or some portion of its stake in GM. Feinberg argues that this provides Whitacre with the appropriate motivation, and in theory, it does. But with the government desperate to ditch its stake in GM before any major elections, the UAW’s VEBA fund eager to monetize its “stakes” in the automaker, and Whitacre being paid a huge amount in stock, all the factors seem to motivate those involved to IPO as quickly as possible. Which would be a good thing, as long as taxpayer equity isn’t wiped out to the tune of $30b+, as has been estimated by the government. Because if we’re paying Whitacre nearly $10m per year for that, well, what’s the point?Meanwhile, where’s the “I’ll-do-it-for-a-buck-a-year” Iaccoca spirit gone? If Whitacre was really playing hardball with Feinberg, and would have left after taking control as Chairman and CEO if he “only” made the same $950k in cash that Fritz Henderson made, what does that say?
Edward Niedermeyer
Edward Niedermeyer

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  • Ihatetrees Ihatetrees on Feb 26, 2010
    Which would be a good thing, as long as taxpayer equity isn’t wiped out to the tune of $30b+, as has been estimated by the government. There's a way to skin this cat. Give Whitacre $1 million/year in cash. Then, structure his pay so that he makes a pile only after the taxpayers have been made whole. If he doesn't like it, he can quit.
  • Porschespeed Porschespeed on Feb 27, 2010

    At the risk of being an old fart, let's get our nomenclature straight, please? Chrysler's "bailout" in the Iaccoca days was NOT a government bailout like we are seeing today. What happened was Chrysler was loaned money by the PRIVATE sector, who, unlike the last few years, had some reservations about loaning money, and actually wanted to have some hope of getting paid back. The gov GUARANTEED the loans. Taxpayers were only on the hook IF Chryco didn't pay the private lenders back. NO taxpayer funds ever went out the door. I realize this is a minor point to some, but it really isn't. Back in the day, no financier would have let GM or Ford get TENS of BILLIONS dollars in the hole, with no way evident on the balance sheet to pay it back. To equate (if only in name) the Fed being Chryco's cosigner for a bank loan with the wholesale rape of the American taxpayer that just happened is just this side of revisionist history.

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