Like many of you I’m sure, the issue of executive compensation has been much on my mind concerning the geniuses at the Big Three automakers who currently want Congress to approve a “bridge” loan (from TARP or elsewhere) to help them out while they do the retooling they should have done long ago to make more efficient vehicles (and I saw an ad yesterday on TV for the Cadillac Escalade and I thought, yep, it’s true; they really never will learn, will they?). The latest reminder came courtesy of this news story from Wednesday about a speech Alan Mulally of Ford gave at a meeting of the Seattle Rotary Club.
And lest anyone think that only Ford, GM and Chrysler are feeling the pinch, this story tells us the following…
"October was the worst month for U.S. auto sales in 25 years," said Carlos Ghosn, CEO of Nissan and Renault. "Nothing is moving. The decline is not confined to the U.S. market; most of the mature auto markets, including Europe, Japan, are also down significantly, with slowdowns in the emerging markets as well."OK, so I’ll give Mulally a bit of a nod for that one.
If the Japanese carmakers are gloomy, who can just imagine how the contingent from Detroit feels. GM canceled its events but still has cars on display. It scratched plans to showcase a new Buick LaCross sedan and a new Cadillac model. Instead, it will lift the veil on those models in Detroit in January.
Chrysler has only a minimal presence at the show as well. Ford, on the other hand, is showing off a new Mustang model, as well as a restyled Fusion hybrid.
But getting back to the issue of compensation, this story tells us that President-Elect Barack Obama has been pushing so-called “say on pay” legislation since last year, with his bill “languishing in the upper house”; somehow I’m sure that, regardless of whether or not the Dems get to 60 seats this election or not, Obama’s bill will be revisited.
As the story tells us…
(Obama’s bill) would make non-binding "advisory" shareholder votes on executive compensation packages mandatory at annual meetings.And this story tells us that…
"Say on pay is in and of itself but a baby step," said Charles Elson, a governance expert at the University of Delaware. "Ultimately the issue is replacing the directors who approve the bad pay."
This is where "say on pay" could get interesting because it is closely linked to another movement, known as "proxy access," which basically gives investors greater ability to nominate their own slates of directors - and perhaps include some kind of statute to reimburse shareholders' for the costs of nominating dissident directors if they are successful. (This would replace the current practice of investors withholding votes for directors, which is often more of an exercise in moral suasion than accountability.)
French CEOs made 56% of what American CEOs did in 2005, according to the latest figures compiled by the Economic Policy Institute in Washington. German and British CEOs made 55%, and Italians, 53%.And this story, which proposes what I think is an interesting theory about executive compensation (even though I personally don’t agree with it; namely, that it should be totally market driven throughout the world and would lower itself on average over time on its own) tells us that Japanese executive compensation is generally lower because more of their executives are trained and promoted in-house. The story also tells us that the decline of unions in this country is tied to the rise of executive compensation (and I most definitely agree with that).
In the USA, the median compensation package (half were paid more and half less) rose to $8.4 million last year for CEOs of 410 companies in the Standard & Poor's 500 index, the Associated Press reported earlier in June. That's a rise of $280,000, or 3.5%, in a year. The 10 best-paid made more than $500 million last year, AP found.
What to do? Well, tell your elected representatives to support “say on pay” legislation when it’s proposed in the next session of Congress (which, after all, merely calls for disclosure by executive boards in an attempt to indirectly pressure them to do right; we can’t literally tell the boards what level of executive compensation to approve, and unless we as taxpayers are bailing these people out, I don’t think we should).
And the next time someone screams about Obama supporting “Marxism” and/or “class warfare” on this issue, remind them that he won the election by almost twice as large of a popular vote as the person he’s replacing when Dubya last ran four years ago.
And if it helps, let the naysayers take a look at this map one more time for good measure.