GM CEO Compensation Jumps 64%; S&P Looking at GM Downgrade
I know we've already reported GM CEO Rick Wagoner and his cronies' '07 pay hikes, cynically released on a Friday to avoid full media scrutiny. But I thought it was worth repeating to place this compensation in perspective. To wit: Standard & Poor's is signaling [via Forbes] that the credit rating service "may as yet downgrade General Motors Corp. (GM), after the agency downgraded GM's 49 percent-owned units GMAC LLC and Residential Capital LLC. The downgrades were triggered by the resignation of the only independent directors at Residential Capital, and the union strikes at American Axle, which have shuttered 30 GM factories. Although we expect these labor issues to be resolved, the timing, and therefore the full extent, of their effect on GM's liquidity is unknown. We expect the American Axle strike to contribute to a very large use of cash in GM's first-quarter 2008 results, which GM will announce in the next few weeks, and the effect will be magnified by the timing of GM's payables and receivables." If S&P downgrades GM, the extra cost of borrowing will add tens of millions to GM's cash burn. So those execs salaries are only the tip of the iceberg when it comes to measuring their true cost to shareholders, employees, suppliers, dealers and customers.
I second the commendation to wmba. It is a great way of saying what I have been thinking and trying to say for the past decade, but I never did it so well!
I’ve forgotten which of the GM spokesmen said a few weeks ago that GM was ‘banking’ on the economy turning around come July or thereabouts. There are many indicators of the GM elite being in denial, and this is just another.
A couple of months ago, Henderson said nobody saw the real estate disaster coming say a year ago. Of course not. Why would anybody think that just because real estate prices had gone up much faster than income for several years running, and just because inventories of unsold houses had been building for months across the country, why would anyone think that we were in for a ‘correction’?
These people are just liars or fools or both. But maybe not. In their world with a board of directors that cruises in the same orbit, and with enough assets for them to bleed down until they retire, and with a Bear Stearns type bailout likely available if it all crashes sooner than expected, they’re right, and the rest of us are wrong. They will very likely come out in fine shape and there was nothing anyone could have seen or done to make things any better.
All this is just one more reason I’m pulling for Ford and Mulally. I don’t know if the recent quarterly profits can be sustained, but I hope Ford makes it; I don’t see how GM can without a bailout. The GM execs have several things in common with Bush. Utterly incompetent, failing at every step and still cocky and arrogant regardless. Irritating to say the least and I don’t even have a cent in their sick game. I don’t see how those invested who have lost so much in stock, real estate or jobs/pensions can stand it.
"The GM execs have several things in common with Bush. Utterly incompetent, failing at every step and still cocky and arrogant regardless." Wagoneer GM CEO, Harvard MBA in 1977 Henderson, GM COO, Harvard MBA in 1984 Bush, US President, Harvard MBA in 1975 Weird commonality, eh? Pretty much the entire GM executive suite is filled with MBAs. The rise of the self-centered professional manager in corporate America exactly parallels the rise of college MBA programs which train people to be cold hearted "numbers" types. Numbers are important, but numbers never created anything. Gates (Microsoft), Jobs (Apple & Pixar), Brin & Page (Google's founders), Schmidt (current Google CEO), Sinegal (founder and CEO of Costco), and Andy Grove (Intel founder & longtime CEO) all have something in common; not a one of them has an MBA. Many have advanced degrees in other fields, but the actual creators of businesses and the leaders who are able to grow them successfully rarely come from the ranks of MBAs. We often hear that the engine of the US economy is small and mid-sized business, and they likewise are rarely started or run by MBAs. The evidence is pretty strong that as a group MBAs are at best caretakers and rarely successful growth leaders. This bit from Ford's website is informative: "Mulally holds bachelor’s and master’s of science degrees in aeronautical and astronautical engineering from the University of Kansas, and earned a master’s in management from the Massachusetts Institute of Technology as a 1982 Alfred P. Sloan fellow." My question is whether the MBA ruined the man or not. One plus for Alan is that getting through an MS in engineering is a very hard task, certainly much tougher than was Wagoneer's task of getting a BA. P.S. I just looked it up, and Jack Welch of GE fame likewise lacks an MBA. He does, however, have BS, MS and PhDs in Chemical Engineering.
wmba, Wait til the fight starts among the board members. You should have heard some of the conversations among the Enron leadership near the end. They would sit around over dinner talking about how great everyone was, and reassuring each other they were all in it together. It was spooky. They held out for a LONG time to. It will not be easy breaking up the clique of current board members. However, the board clique is not nearly as tight as the Enron management. Many of these guys will see the train coming from the other end of the tunnel, and the long knives will come out something fierce. Look for some of the worst offenders to get sacrificed first. If that doesn't work, it will get soooooo ugly. The press will have a field day.