Ford Faulted for Mixed Messages on Salaries
ROBERT SIEGEL, host:
You'rThe board of Ford Motor Company is considering another round of deep cuts and this time, according the Wall Street journal, the target is the company's white collar work force, which may be cut by as much as 30 percent. A week ago, the big news at Ford was the $20 million pay package the company put together for its new CEO, Alan Mullaly. The size and timing of that pay package are drawing criticism from some compensation experts.
NPR's Jack Speer reports.
JACK SPEER: Ford's new CEO, Allan Mullaly, is not a car guy. He spent his entire career at Boeing, where he eventually served as head of the company's commercial plane division. He was a key player in Boeing's remarkable turnaround. And if one thing is clear at Ford, it is that the company needs a turnaround. Compensation analyst Alexandra Higgins says the pay package Ford offered Mullaly puts him well ahead of where he was at Boeing.
Ms. ALEXANDRA HIGGINS (Compensation Analyst): It's a lot higher actually, especially with the base salary of two million a year, and I think that people are especially angry with the hiring bonus.
SPEER: That hiring bonus totals seven and a half million dollars, according to a recent filing with the Securities and Exchange Commission. Ford will also pay eleven million dollars to offset stock options Mullaly lost when he left Boeing. And the 61-year-old executive will receive three million of new stock options at Ford.
Harley Shaiken, a professor at U.C. Berkeley who tracks labor issues, thinks Mullaly's pay package is excessive. Especially given the large losses at Ford, around a billion and a half dollars in North America this year.
Professor HARLEY SHAIKEN (U.C. Berkeley): This is not business as usual and simply to say we need 20 million to get a good CEO begs the question of the very high executive salaries that went into creating the poor decisions that led to part of the problem today.
SPEER: And Shaiken says the lavish pay package could not come at a worse time. Ford is in the process of a downsizing plan that will shut more than a dozen plants and eliminate tens of thousands of blue collar jobs. However if Mullaly can do for Ford what he did at Boeing, 20 million dollars might not seem like so much.
Pat Magern(ph) is with Institutional Shareholder Services, an investor rights group. He agrees when you add up everything, Ford is paying Mullaly a lot. However he says given the situation Ford faces, the automaker has little choice.
Mr. PAT MAGERN (Institutional Shareholder Services): If you are forced to go outside and hire someone to replace a sitting CEO, you're going to have to essentially pay them three times. You're going to have to make up what they're giving up at their current position, pay them a going rate as far as leading CEO talent out on the marketplace today and you're going to have to provide them with a parachute in case their tenure doesn't work out at the company.
SPEER: Mullaly's pay package doesn't even put him in the top 50 in terms of CEO compensation. It's also a lot less than star baseball players like Alex Rodriquez or Derek Jeter make. Compensation experts say another reason top CEOs, like athletes and entertainers, are so well paid today is because they have a limited life expectancy. John Challenger is with the outplacement firm Challenger, Gray and Christmas.
Mr. JOHN CHALLENGER (Challenger, Gray and Christmas): Average tenure today, five or six years is about what you get. Certainly one of the concerns they have is I know I'm not going to be here forever. I want to be taken care of.
SPEER: And given the situation at Ford, Mullaly won't have a lot of time to engineer a turnaround. There are many tough decisions to make and he won't have a completely free hand. He will have to work closely with the chairman, Bill Ford, something that could prove difficult given the Ford family's close ties to the company.
Jack Speer, NPR News, Washington.