• Jun 28, 2010
It's certainly tough to argue with the results of Alan Mulally's tenure as chief executive officer of Ford Motor Company. The product and financial resurgence that Mulally has led allowed Ford to be the only Detroit-based automaker to avoid going through bankruptcy. That success is reflected in the Ford CEO's paycheck as well.

Mulally earned more in 2009 than the CEOs of Toyota, Nissan and Honda combined with a total take of $17.9 million in cash and bonuses. Toyota's Akio Toyoda earned $1.1 million and Honda's Takanobu Ito took home $1.3 million. Nissan's Carlos Ghosn was the highest paid of the Japanese company executives at almost $10 million.

It's not at all unusual for American executives to earn more than their counterparts overseas, although currently only Mulally is earning these large sums in Detroit. General Motors CEO Ed Whitacre and Chrysler CEO Sergio Marchionne are both limited as a result of the government bailouts. In spite of Mulally's success, his pay still pales next to the $100+ millions regularly paid to financial executives.

[Source: Detroit Free Press | Image: Bill Pugliano/Getty]


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  • 60 Comments
      • 4 Years Ago
      I think we can get better product if the workers are happy.

      That means job security, profit sharing, stock options, decent pay.

      Why must all those things be sacrificed just so shareholders can reap the most awards? And guess who are major shareholders? Board members and upper mgt.

      In the 1960s, CEOs made 40x the avg salary of the avg. worker. Now it's at least 600x.

      Are the CEOs working 600x that of the avg. worker?

      Why can't US auto CEOs make as much as the Japanese or European CEOs? Especially when their performance (long-term) is no better?
      • 4 Years Ago
      Earning more than the top tier Japanese CEOs COMBINED?!

      Ummm. No. That's more typical Corporate America BS.
      I don't care how good his performance has been (and I am not disputing that he has made some great decisions), but earning THAT much is obscene when companies that have been doing financially great for decades pay their CEOs a fraction of that amount.

      And that is nearly $20M/year just for Mullaly. Add in the rest of his executive team, as well as the Board, and that is a lot of money that could and should be invested back into the company to improve their products. Over-paying these executives is one of the keys as to why American businesses have such a hard time being competitive on a world-stage.

      The fact that so many people have no problem with this is absurd.
        • 4 Years Ago
        So sell your stock position if you are displeased. Toyota is available in the NYSE as well. Are you happy with F performance? If so, the pay of the CEO is sort of a moot point in anything other than an academic debate of value. However if you don't like it, sell or vote for change on the board when given the opportunity (which you and every other shareholder is given).

        Just to point this into perspective. A-Rod makes more. So yes we can compare to Japaneses execs or we could compare to other making similar salaries for doing less.

        What do European automaker's CEOs make?
        • 4 Years Ago
        As a Ford shareholder, you better f'en believe I have a say.
        • 4 Years Ago
        Who are you to tell a company what they can pay their employees? The fact that you have no problem thinking that you should have a say is absurd.
      • 4 Years Ago
      OK, it's a lot of money. But only about $1.5 million was in cash and cash-like compensation (private jet usage), the rest was in long-term shares. So I don't have a big problem with this, because if he tanks the company back down to a share price of $1, he's only left with about $2.5 for the year. He has an incentive to keep the company on the right track, unlike his "peers" in the financial industry who were paid huge cash bonuses whether the company did well in the long run or not.

      http://www.guardian.co.uk/business/andrew-clark-on-america/2010/mar/22/ford-alan-mulally
        • 4 Years Ago
        I understand your logic, but I think there are ways to structure the share payouts such that it is not dependent on economic conditions. Have the chunk of shares from each year split into pieces that vest every year, so that they will average out macroeconomic conditions and accurately represent the long-term average behavior of the company.
        • 4 Years Ago
        Most of the rise in value of the company comes from government largesse, mainly Cash for Clunkers, bank bailouts and the stimulus making it possible for the middle class to buy cars again. This was a large contributor to the increase in Ford's business (even more so for GM and Chrysler).

        This is the problem with executive compensation being based upon share value. Economic conditions are a huge input to the stock value. So when a bad economy means a CEO gets no additional compensation, they usually get large bonuses votes to them "because it's not their fault" and we all understand. So then when the economy goes the other way and they pick up a lot of compensation that isn't really due to their actions, we don't feel like "it isn't their fault" and there is no negative bonus to go along with the windfall? Many CEOs just end up sticking around until an up period goes through, then they line their pockets with gold and go.

        Look at "CEO of the century" Jack Welch for example. He "made a ton of money" for GE based upon the same bad math that led to the banking collapse and reaped a big pile of cash.
      • 4 Years Ago
      what do they do with that paycheck
      • 4 Years Ago
      Important fact - Mulally's salary isn't being paid by money stolen from the American and Canadian taxpayers. Therefore it is completely up to Ford's Board of Directors what his pay is and it is NO DAMNED BUSINESS OF ANYONE'S (OR SEA URINAL's) what he is paid. It is one thing to be jealous of what other people make, but it gives you no right to limit anyone's compensation - and if we are going there, let's make pro athletes work for minimum wage.
        • 4 Years Ago
        No one's saying it should be "limited." It's simply an obscene number, enabled by boards who are out of control and accountable to no one but their buddies.

        The rise in CEO pay has simply not been justified. He should be paid well, of course, but enough to set up his great-great-grandchildren for life? I'm sorry, but that's just ridiculous.
      • 4 Years Ago
      It doesn't take rocket scientistto borrow a ton of money to stay afloat.

      It doesn't take a rocket scientistto figure out the Ford 500 is a lame car.

      It doesn't take a rocket scientist to lay off thousands of workers to save money.

      And for the above, he gets paid $18M/year...

      And if a UAW worker makes $26/hour...the reich-wing goes nuts.

      This country is going down the toilet...fast.
      • 4 Years Ago
      Despite what some of your socialist college profs have been teaching you, this is a free market and companies can pay their employees whatever the market will bare.

      I will never make 1 million, 10 million, or 100 million a year. But I am glad I live under a system that does allow such incomes to exist. To all you naysayers, the alternative to capitalism is much worse and be careful for the "change" you wish for...........
        • 4 Years Ago
        Apparently you haven't been paying attention but the market can't bear these CEO salaries. But because they are so widespread In order for our entire economic system to not collapse we are forced to subsidize it in one way or another. The divide between the rich and poor is wider than it's ever been and things keep getting worse and worse. You don't see any correlation there?
        • 4 Years Ago
        I forgot about the less than prohibition on AB.

        I meant to say at the end "and the amount of money in less than 1% of the population is not a measure of the success of the system".
        • 4 Years Ago
        This isn't capitalism. That you've been hoodwinked into thinking it is constitutes a large part of the problem.

        Were this capitalism, and not a nascent plutocracy, pay-for-performance would be a real option, rather than a "pat, pat, there, there" token effort to stop shareholders from whining. There's no effective corporate governance, no way to hold the executive accountable, no way to ensure compensation is fair and reflects performance and, this is important, no incentive to change. The people who have any stake in this system are quite happy with it, and certainly will make no effort to improve it.

        As it is, the "market" and certainly the corporate leadership model, is nearly as much an "old boy's club" as the worst examples of autocratic socialism.

        The difference is that it's much more subtle here. We've learned that Pinkerton-style behaviour and outright aristocratic tendencies only enables the lower classes and galvanizes popular support. Much better to make the unions and the anti-globalists make *sses of themselves which, to their detriment, they're so very capable of doing.
        • 4 Years Ago
        I agree executive compensation is a free market. It's a poorly-functioning one as execs regularly get paid a ton of money for mediocre or poor results.

        I definitely don't agree that is the heart of capitalism.

        Somehow that word got co-opted to mean "the rich get richer". The actual heart of capitalism is that the desire to enrich oneself is harnessed to improve life for all of us through better efficiency and use of resource and better and cheaper products to buy. That does seem to be happening here, but $18M in CEO compensation isn't any indication of the success of capitalism.

        Markets are markets, but capitalism is a system and the amount of money in the pocket of
        • 4 Years Ago
        Well CEO pay is just based on supply and demand, right? There's a very small group of people who can be CEOs like there's a very small group who can be major league pitchers. Oh right - except in the case of CEOs, where their pay is set first by compensation consultants who go see what all the other CEOs are making and then make up a number at the highest end of that average - because they're being paid to return a number that the CEO will like. And then the compensation is rubber-stamped by a Board of Directors who have the companies best interest in mind - and totally won't be considering the fact that this CEOs pay will be part of the calculation/justifications for their next contract. Because that would never cross their minds. So it's just like those major league pitchers, only if the pitchers pay was set by a group of other major league pitchers, who can then argue that they deserve more pay because they just gave that other guy more pay.
        See? Supply and demand.

        That being said, Mulally's pay isn't that bad compared to a lot of other US execs.
      • 4 Years Ago
      Mulally has been CEO at Ford for less than 4 years, which means that most of the product development work that is now paying dividends at Ford was underway long before he was hired.
      • 4 Years Ago
      Given what he has done for the company, and its shareholders, (created $18 billion in shareholder value in the past 52 weeks) then $170 million wouldn't have been out of the question. Proprietary traders at Investment banks like Goldman Sachs make about 10% of their portfolio gain, so if they make the firm $500 million, they pull in $50 million... (hedge fund managers and private equity managers take 20%)
      • 4 Years Ago
      Yes, it is a princely sum. But it pales in comparison to the profits he brought back to Ford.
        • 4 Years Ago
        Agreed. The notion that these Wall Street guys deserve $100 million for failure is absolutely absurd and should end immediately.

        Even in the face of great success...this pay is far too high.
        • 4 Years Ago
        Ford is nowhere near out of the water yet. They'll need to maintain profitability for more then a single year.
        • 4 Years Ago
        @D "When I see that we're still paying our CEO's more than their overseas counterparts it tells me we're paying our CEO's too much"

        What do you mean "we" are paying "our" CEOs too much? It's the company and the shareholders paying them, not "we".

        Also, if your conclusion that CEO's are being paid too much is based of comparison to overseas counterparts, why not apply that benchmark to every other worker?

        Or are you just playing the tired class warfare card because you have no real argument to make?
        • 4 Years Ago
        He did not cause the ills that led Ford to the brink, and holding some massive debt. But he did get the core Ford product in far better shape than GM, and if he does now address the Lincoln issues Ford can profit enough in the future to actually pay down their debt AND continue to improve product.

        Compare this to GM, whose product is still lagging, is still shuffling management like musical chairs, has no advertising message they maintain. And Chrysler, who so far has barely done anything tangible. Sure, they have made gains (even some profit), but not as effective or substantial as Ford.
        • 4 Years Ago
        @notYou, "Also, if your conclusion that CEO's are being paid too much is based of comparison to overseas counterparts, why not apply that benchmark to every other worker?"

        LOL, yeah, I am also liking the idea of applying that benchmark to every other worker because in a country such as Japan (and most of western Europe), ratio of average salary of regular worker to average pay of CEO is 1:10 where in USA in a lot of cases it is 1:100, do you see a bit of discrepancy? No matter how good a CEO is, he wouldn't accomplish anything without its efficient workers, good financial advisers, its imaginative engineering, well, you get the point, Ford is not a one man show. Besides, Ford is still far away from financial stability. Stock options are one thing, but such ridiculous salaries/bonuses are another. How come CEOs get rewarded such millions when they do a good job, but yet when they fail, they don't have to pay a percentage of losses back?
        • 4 Years Ago
        @notYou:

        "What do you mean "we" are paying "our" CEOs too much? It's the company and the shareholders paying them, not "we". "

        I think he means our national companies. As in, American companies are paying American CEOs too much. And we can restrict that or at least engineer the ratio down through the use of the tax code. If enough voters demanded that. (Which they wouldn't, I'm just saying - it's not out of the people's control.)

        "Also, if your conclusion that CEO's are being paid too much is based of comparison to overseas counterparts, why not apply that benchmark to every other worker?"

        Haha, then most of them would probably make more. I'm for it!

        "Or are you just playing the tired class warfare card because you have no real argument to make?"

        It seems more topical than ever, actually.
        • 4 Years Ago
        @D - Did Ford's CURRENT CEO put Ford in it's perilous position? (Hint: the word rhymes with 'go'). And no one does it alone, but someone runs the company. Do it wrong and you get Chrysler and GM.

        I am not saying other CEO's deserve their massive payouts. Definitely not the ones that destroyed their companies. And though it is quite high compared to foreign CEOs, it is not egregious in comparison to Ford's performance, which is arguably better than pretty much every maker out there.
      • 4 Years Ago
      Remember that Ford had to make Mullaley a sweet offer to pry him away from Boeing. It was uncertain if Mullaley would ever be promoted from head of the commercial aircraft division to CEO of the entire company, but it was still a great position.

      Further, the Ford family still holds a large number of shares in FoMoCo. Ultimately, the CEO of Ford has to answer to the Ford family, and not just the board of directors. Many people who are qualified to run a multi-billion, multi-national company won't work for one in which a family has a significant stake, because of the potential problems with that kind of ownership.
      • 4 Years Ago
      Yes, he has done his job well. The problem is when he did not, he would still earn something like 500k. Do you think, it's a balanced deal? He comes always as a winner out of it. It would be ok, if he had to give 17m out of his pocket in case of bad numbers. His decisions could be fatal for a lot of lives. Knowing they have their own money in the play, they would also make the decisions more carefully.
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