By John Zajac
“It’s an outrage after all the sacrifices we have taken and the pay he gets. His pay is coming out of our concessions.” – Gary Walkowicz, UAW Local 600 committee man, Tuesday March 23, Wall Street Journal
The headline read “Ford CEO Pay Rose As Profit Returned”. Unfortunately, Mr. Walkowicz is carrying over residual feelings of hurt and confusion. One hopes that his quote was a bit of grandstanding for the membership and not his authentic misinterpretation of economic and business realities.
Mr. Mulally certainly doesn’t need me to defend his salary, compensation plan, or job performance. In fact, he’s done all right on his own. When asked at the Congressional hearings if he, like Rick Wagoner and Bob Nardelli, would take his salary down to a symbolic $1 a year, he simply said, “No, I’m good.” And the overall reception of his performance by Wall Street, Main Street and most roads and by ways has been pretty positive. After all, Ford stock traded at a low of $1.26 in November of 2008, on the eve of the congressional hearings. Last week it had improved over ten-fold, at $13.57.
What I wish more people in this State and Industry understood was that not all management pay comes off the backs of the oppressed working class. Now there are cases of head-scratching executive bonuses as employees are tossed out, shareholder value is being destroyed and customers flee from showrooms. More about that later. Unless there’s a plan by shareholders or the Board of Directors to deliberately shrink a firm and destroy their investments, such compensation schemes are suspect at the very least.
Fundamentally, though, whether in good times or bad management, labor, and even salaried people all get their compensation from one source – the people who buy their products. Some compensation is more indirect than directly received via company revenue. Mr. Mulally, who has provided so much good news of late, is a good example on how this works.
To the surprise of nearly everyone, Ford made $2.7 billion in 2009. This was at the same time that GM and Chrysler were going bankrupt and each received billions in both loans and equity from we, the taxpayers. This was a stunning turnaround by any measure, and Mr. Mulally certainly cashed in. His total compensation rose from nearly $17 million in 2008 to a staggering $17.9 million in 2009, a huge 6% jump.
So, given the huge turnabout in the firm’s fortunes, Mr. Mulally hardly made AIG or Goldman Sachs bonus money.