Mulally’s Pay: How Much Is Too Much?

March 15th, 2012

Mulally's hands

I remarked last Friday on Ford CEO Alan Mulally’s exorbitant pay package, while CEO Sergio Marchionne took no pay at all from Chrysler for 2011, though he is getting undisclosed compensation from Fiat.

Actually, Alan’s haul seems to be worth $58.3 million (before taxes), not the after-tax figures I reported. Marchionne got $4.5 million from Fiat in 2010, plus $600,000 in stock awards; GM’s Dan Akerson took home about $9 million in salary and stock.

So, did Ford give away the store to this guy, despite the fact that, as everyone says, he brought the company back from the brink? UAW President Bob King complained last year that his stock package ($54.5 million) was “morally wrong,” even as he praised him for being a great CEO.

So far, not a peep from the union. Because, under its 2011 contract with Ford,

American plant workers received about $16,000 in bonuses, between a $6,000 signing bonus, a profit-sharing deal that was said to be worth about $3700, and a $7000 inflation protection/cost of living increase.

Most people want to credit him with the very impressive turnaround that Ford has made, claiming in good old American business style that he’s “worth every penny.” And yes, the company took tremendous losses before finally stabilizing in the last two years.

Alan Mulally hugs Sergio Marchionne

M&M

I don’t care, it’s still too much money—particularly when compared to what his rival bosses earned. According to investor reports, Volkswagen CEO Martin Winterkorn earned $12.2 million total compensation in 2010 and was the highest-paid CEO in Germany. Carlos Ghosn received about the same amount from Nissan-Renault. Akio Toyoda earned 160 million yen (about $1.9 million U.S.).

Is Alan that much better than these guys? Did he have more to overcome? Some give him all the credit for not going to the government for a bailout. But Ford went into debt bigtime instead.

What I do give him credit for is making Ford truly a performance-based company and changing its policies and culture in order to bring it to a valuation now six times what it was in 2008.

Does that make him worth so much bread? I don’t think so, particularly when you factor in the message it sends around the world, where Ford intends to do a lot of business.

What do you think? Is Alan Mulally worth his $58.3 million stock bonus?

—jgoods

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  1. Rick
    March 22nd, 2012 at 12:02 | #1

    To compare Gm’s & Chryslers exec’s bonuses to Mulally’s doesn’t wash. First you need to realize that Mulally turned Ford’s fortunes around without a federal Bailout. The other two exec.s are on a leash from the Federal Government.
    Compared to what Sports athletes and Hollywood types make this is a bargain.

  2. Tim
    March 16th, 2012 at 09:47 | #2

    While I agree that Mulally’s pay seems excessive, it’s not like it’s his salary. The majority is based on stock options and if the Ford Board thinks it’s fair, that’s really all that matters. And it might be worth holding on on Sergio Marchionne’s ‘zero salary’ from Chrysler as a comparison. According to this article on 3/15/12, Marchionne made $18.9 million from Fiat last year to run Fiat AND Chrysler.
    http://www.freep.com/article/20120315/BUSINESS0103/120315024/1206/business01/Sergio-Marchionne-paid-18-9-million-by-Fiat-2011

  3. Randy
    March 15th, 2012 at 18:17 | #3

    I’ve been looking at Fords for years now and have never bought one. No matter what size or segment, their cars and trucks always seem to end up being priced higher than the competition while offering much the same, and in many cases, less for the money. I have to chalk the difference up to big bonuses and the fact that Ford’s structural costs remain the highest in the industry.

  4. panayoti
    March 15th, 2012 at 15:42 | #4

    We can all bitch about these guy’s salaries and there is absolutely nothing we can do to change the culture of these humongous companies. It is something that has been going on since the beginning of time. We’ve know about it, bitched about it, had protests and demonstrations in front of their headquarters, their shops, and storefronts, all for naught. This is a cultural thing that breeds jealousy and envy in every aspect of business, entertainment and politics. Such is the human condition.

    More to your point, I have no problem with individual achievement reaping millions and billions. Gates, Buffett, Jobs, Zuckerberg and others who invented or created a product or a service deserve and earned every penny they made and no one should ever bitch about that. Much like you however, I do have a problem with people that didn’t invent or create a product or a service, but run or manage a company or corporation which allows them to generate them millions and billions simply because they have only boards of directors to placate. As long as the boards and stockholders are happy, the CEO pretty much gets all the credit for success and is usually rewarded with tenure and benefits that become self fulfilling and thus result in ever escalating pay packages, all because the boards and stockholders don’t want to lose their source of wealth.

    As we’ve been told billions of times, if you don’t like something, don’t buy it, use it, view it, eat it, wear it or drive it. Much as we bitch, we do nothing. When and if that ever happens, then maybe something could be done. I too bitch but don’t you dare insist that I can’t have my Oreos, Charmin, Fig Newtons or Subarus. (vbg).

  1. April 9th, 2012 at 15:06 | #1