by Jack Lee
(SPECIAL INVESTIGATIVE REPORT)
GM is looking for billions in bailout money from the taxpayers and I think whatever your position is, you deserve to see how GM is running it’s store. The foundation of that store is built on wages and that is today’s focus. A lot of people assume overpaid workers are too blame, some blame the Executive officers, here are the facts…you decide.
The UAW (Union) said it was reluctant to discuss wage and benefit changes in order to secure a bailout without Executive salaries being trimmed. The UAW says it knows it needs to help Detroit’s automakers cut labor costs to reduce the gap in production expenses with Asian rivals. But as talks continue on new contracts, the union also is questioning why top executives at the automakers are paid so much.
“As much as workers do, workers can’t do enough, and as much as executives get, they cannot get enough,”
UAW President Ron Gettelfinger said during last month’s two-day strike against General Motors.
GM’s top CEO received about $14 million dollars including salary, bonuses, restricted stock awards, payouts on long-term incentives and the value of options exercised during the year, which was strongly up from last year. The 1st Vice Chair received about $7.6 million in stocks and bonuses, also up from last year. Both received pay increases exceeding $6 million in the past 12 months. The lowest compensation for the top management team is the 4th Vice Chairman at around $4 million.
Executive pay was cut as GM went through multi-billion-dollar losses under immense market pressure several years ago, but after those cuts the members of GM’s top brass are getting their old salaries back and it couldn’t come at a worse time.
Top boss Rick Wagoner’s base pay went as “low” as $1.1M (not including generous incentives) but is now back to its 2003 level of $2.2M, plus incentives to total about $14 million. Product czar Bob Lutz and money man Fritz Henderson (CFO) also had their pay restored, and Fritz even got a raise to reflect his promotion to COO.
Many of the pay cuts were voluntary in recognition of GM’s market struggles, but even with the cuts in base pay, overall executive pay packages are worth a lot more than just the salaries alone. Wagoner, as noted above, also received compensation of $14.4M in 2007, while Bob Lutz came in at $6.9M.
A production supervisor makes a starting pay of $48,000 a year which works out to be about 1/292nd of what the boss makes. Executive compensation has grown exponentially compared to worker wages over the past 40 years. An average CEO earns more before lunchtime on the very first day of work in the year than a minimum wage worker earns all year. In 2001 CEO pay ratio to worker wages reached a high of 525 to 1.
Had minimum wage since 1990 kept pace with the increases in CEO pay, minimum wage today would be $23.03 an hour instead of just $5.15. And the average production worker would be making $110,126 a year instead of $27,460.
Many researches now claim executive compensation reflects unbridled greed and this was the setup for many of the problems we’re facing today, not just in the automotive industry, but everywhere. Sandy Weil of the besieged Citicorp received 1.1 billion in incentives since 1998 while his company slowly tanked. Frank Raines, CEO at Fannie Mae, received over $90 million in commissions from sub-prime loans while he bankrupted the company and cost taxpayers hundreds of billions of dollars. He cooked the books to make his commissions, but he has never been indicted, however he did pay a small fine of about 1.1 million. New York Attorney General Andrew Cuomo told American International Group Inc. in a letter Tuesday that the insurer should be “completely transparent with taxpayers” on executive compensation given the more than $150 billion AIG has received from the government. Cuomo said that top executives should “shoulder their fair share of these difficult economic times,” and that AIG’s decision on making bonuses and pay raises transparent “has significant legal ramifications.”
Whatever the outcome will be for the Big 3, in particular GM, one glaring fact remains certain: They must change the way they do business! None of the companies mentioned above, can maintain their current business models without losing market share and profits. Any bailouts now will only delay the inevietable… if they won’t change!