At a time when many folks across America are tightening their belts, squeezed between rising costs and declining income and benefits, General Motors CEO Rick Wagoner has some celebrating to do.
The executive had to get by on a miserable $1.3 million last year, a pay cut enacted in the face of the automaker’s $10 billion loss. Now, with most signs suggesting GM is on the mend, Wagoner’s paycheck is being restored to his earlier $2.2 million, the same amount he made between 2003 and 2005.
That might come as a shock to the workers who recently voted to accept sharp cutbacks – including a first-ever, two-tier wage structure that will, going forward, cut in half, to $14 an hour, what tens of thousands make.
On the other hand, one could argue that Wagoner has achieved something of a miracle. A few years ago, it was hard to find a product in the GM portfolio that serious skeptics could rave about. Now there are plenty, including the new Chevrolet Malibu, which recently was named North American Car of the Year, by a panel of 50 U.S. and Canadian autowriters.
That contract I mentioned will save GM billions, eliminating about two-thirds of the cost gap between the U.S. maker and the so-called “transplant” assembly lines run by its import rivals. Overall, under Wagoner, GM expects to have achieved, by year’s end, about $9 billion in annual cost savings. Even without the new contract, its productivity was approaching that of Toyota. And quality is on the rise, as well, the picky Consumer Reports magazine putting the Chevy Silverado back on its Top Picks list, the first time a Big Three product has landed there in several years.
But even so, GM continues to lose money. In fact, it set a record in 2007, with a $38.7 million deficit. The vast majority of that came through accounting changes and one time charges – otherwise, it would have been a reasonably manageable $23 million loss – but it was still the third year in a row of red ink, however you parse the numbers.
So, does Wagoner deserve the big money he’ll take home this year – along with the stocks and bonuses promised for meeting various targets? Or should he have been up for another, even bigger pay cut?
That’s something Detroit insiders will likely debate for some time, but perhaps there could’ve been another way to handle this. Just consider what’s happening over at Aflac, the Columbus, Georgia health insurer best known for its quacking duck commercials.
Like many top American executives, CEO Donald P. Amos has heard plenty of complaints, over the years, about management pay. He’s offered up the same sort of defenses used to justify Wagoner’s $2.2 million, and the $20 million former Chrysler Chairman Lee Iacocca made after the company turned itself around, in the early 1980s.
This time, however, Amos is betting his proposed pay on his own track record. At Aflac’s annual meeting, in May, the insurer will become the first publicly-traded American company to give investors a chance to vote on a CEO’s compensation. Officially, it’s a non-binding vote, but who expects the Aflac board to refute the results of this landmark vote.
How would Wagoner fare if he put his own paycheck to the shareholders? We’d bet he’d come out fine. In fact, he might get even more. A couple years ago, everyone seemed to be calling for his ouster, but these days, though GM is still in the red, Wagoner is generally seen as one of the best leaders in the industry. So maybe it wouldn’t be a bad idea for the former Duke basketball star to test public reaction. It would be another sign that GM is doing the right stuff.