Corporate America is Fubar
HOW WOULD you like to be paid $39 million for four months of work? That’s the situation for Alan Mulally, the president and chief executive of Ford Motor Co.
According to recent news reports, when Mulally took over as CEO of Ford on September 1 of last year, he immediately started raking in the big bucks. For just the four months he worked last year--September 1 until December 31, a total of 122 days in all--Mulally received total compensation valued at $39.1 million. That’s $320,491 a day--including weekends.
In addition to his $666,667 in straight salary--a prorated amount based on his $2 million annual “earnings”--Mulally also got a $7.5 million hiring bonus and $11 million to offset performance and stock option awards he forfeited when he left his previous company. He received other compensation totaling $334,433, including $172,974 for use of corporate aircraft and $55,469 for “relocation costs” and “temporary housing.”
And to top it off, Ford gave Mulally stock and option awards worth an estimated $19.6 million when they were granted to him on his first day on the job, according to the Associated Press.
No wonder Mulally praised his fellow Ford executives when he opened the recent New York International Auto Show. “Look at the smiles on their faces,” he said, pointing at them.
Ford workers have less reason to smile these days. Last year, the country’s second-largest automaker lost $12.7 billion, the largest loss in its history. Management, led now by Mulally, has undertaken a massive restructuring program aimed at cutting costs through cutting jobs. Chrysler is cutting 9,000 jobs in the US and 4,000 in Canada.
The company announced last year that it would seek to close 16 plants and slash at least 30,000 jobs by 2012. Additionally, Ford and other automakers have squeezed workers’ health care and pension benefits.
In the past year and a half, the United Auto Workers has agreed to concessions in retiree health care at Ford worth $850 million, as well as lower pay scales for new workers and buyout programs that have prompted tens of thousands of workers to retire early or take a lump sum in cash and give up their jobs and benefits.
If, on the other hand, Mulally ever decides to leave, he’ll have a golden parachute to break his fall. According to the Detroit Free Press, his severance package will be worth $27.5 million if he’s terminated “not for cause” or for “good reason,” such as a change in control at the company.
OF COURSE, Alan Mulally isn’t alone. There are many other corporate CEO's involved in such absurdity.
Verizon chief executive Ivan Seidenberg earned more than $109 million in the past five years--despite the company losing money while he was in charge. Former Home Deport chief Robert Nardelli was given approximately $210 million to clean out his desk--including $20 million in cash severance and $77 million in deferred stocks--on top of the $240 million in compensation he received during the six years that he was in charge of the company.
Meanwhile, the Bush administration announced with much fanfare last week that the unemployment rate had dropped to 4.4 percent in March, matching a five-year low. But for factory workers--including in auto, furniture, clothing and textiles--the number of jobs declined for the ninth straight month. Residential construction jobs, a casualty of the housing slump, also fell.
Nevertheless, according to economists, while unemployment may have fallen somewhat, wage growth is NOT accelerating.
According to the Center on Budget and Policy Priorities (CBPP), data released by the federal government last month showed that the share of national income going to wages and salaries in 2006 was at its lowest level ever recorded, with data going back to 1929. By contrast, the share of national income captured by corporate profits was at its highest level on record.
“As a consequence, wages and salaries have captured an exceptionally small share of the total growth in national income that has occurred in the current period,” reported the CBPP. “Only 34 percent of the overall increase in national income since the end of 2001 has gone to increases in workers’ pay, a smaller fraction than in any other expansion since World War II. For the first time on record, corporate profits have captured a larger share of the income growth in a recovery--46 percent of it--than wages and salaries have.”
Furhermore, as you may have heard, Circuit City Stores Inc., the second-largest U.S. electronics retailer after Best Buy Co., fired 3,400 of its highest-paid hourly workers and will hire replacements willing to work for less.
The company said its eliminating jobs that paid "well above'' ($10 to $11 an hour) market rates. Those who were fired can apply for the lower pay, company spokesman Bill Cimino said according to Bloomberg. He declined to give the wages of the fired workers or the new hires. "Firing 3,400 of arguably the most successful sales people in the company could prove terrible for morale,'' said Colin McGranahan, an analyst with Sanford Bernstein & Co.
However, despite the massive firings, Circut City Chief Executive Officer Philip Schoonover was paid $8.52 million in fiscal 2006, including a salary of $975,000 and Best Buy CEO Brad Anderson received $3.85 million, including a $1.17 million salary.
The job cuts are "one of the most brazen examples of corporate America run amuck,'' said Greg Tarpinian, executive director of Change to Win, which represents seven unions and about 6 million workers. ``It's workers as disposable commodities, put in and put out based on whatever happens to the stock price.''
Circuit City said it will also eliminate another 130 jobs after agreeing to outsource some computer jobs to International Business Machines Corp. IBM got a seven-year contract valued at $775 million to manage some technology operations.
Circuit City is also studying the sale of its 900 Canadian stores.
Corporate America is Fubar.
