CEO Gaffe of the Week: General Motors

This year I introduced a weekly series called "CEO Gaffe of the Week." Having come across more than a handful of questionable executive decisions last year when compiling my list of the worst CEOs of 2011, I thought it could be a learning experience for all of us if I pointed out apparent gaffes as they occur. Trusting your investments begins with trusting the leadership at the top -- and with leaders like these on your side, sometimes you don't need enemies!

This week I want to highlight the CEO of General Motors (NYSE: GM  ) , Dan Akerson, and his stooges, the GM board of directors.

The dunce cap
This is a rare case where it seems the company's board of directors worked together to place the dunce cap on the hapless CEO's head.

Based on paperwork filed with the Securities and Exchange Commission yesterday, Dan Akerson took home $7.7 million in compensation in 2011. This pay package, which was strongly tied to GM's stock performance, tripled Mr. Akerson's pay from the previous year. However, compared to peers Alan Mulally at Ford (NYSE: F  ) , who took home $29.5 million in compensation last year, and Chrysler-Fiat CEO Sergio Marchionne, who earned $22 million, Mr. Akerson's pay package was in the bottom 25% of the industry.

Now here's where things really got interesting. GM's board, in response to yesterday's filing with the SEC, released the following statement concerning executive compensation:

Appropriately recognizing and rewarding these key contributors and competing with other large, multinational employers to attract and retain fresh talent with critical skill sets is extremely difficult. We are not able to deliver compensation for critical personnel in a manner that will continue to focus and drive their efforts in alignment with GM's internal business plan for sustained long-term growth.

Hang on while I go get my violin. Considering that GM's top 20 executives took home between $1.3 million and $8.3 million in total compensation in 2011, I'd be more than happy to relieve them of their duties if making that kind of money leaves them unmotivated enough that lose focus or drive for their duties. Seriously, GM board? You actually thought releasing this statement was prudent?

To the corner, GM board
But wait -- there's more!

Of course there is; there's always more! It's already absurd enough to see a board whining about executive compensation to motivate key talent, but it's even more ridiculous when the company still owes the U.S. taxpayers about half of the $49.5 billion it was loaned under the TARP program, yet still asks for permission to significantly increase executive pay. Now that's audacity! (Or perhaps just plain ignorance.)

Championing the people's best interests, the U.S. Treasury Department announced it would be freezing executive pay and reducing salaried compensation by 10% in the upcoming year for TARPs biggest offenders, which include GM; American International Group (NYSE: AIG  ) , which has paid back about three-quarters of what it borrowed; and Ally Financial, which still owes about two-thirds of what it borrowed.

But don't feel sorry for GM executives like Akerson, even after the company's record year, in which it produced $7.6 billion in profits. Let me remind you that in 2008 and 2009 the company's cash outflows totaled more than $42 billion! So for those of you crying that Akerson deserves the same pay as Ford's Alan Mulally, don't forget that Ford never took a bailout and can therefore raise or lower compensation packages as it pleases. Being 32% owned the U.S. taxpayers, GM and its executives have little room to complain about their pay packages until the company repays its debt obligations.

Do you have a CEO you'd like to nominate for this dubious honor? Shoot me an email and a one- or two-sentence description of why your choice deserves next week's nomination, and you just may wind up seeing your nominee in the spotlight.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. He is merciless when it comes to poking fun at CEO antics. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Ford Motor. Motley Fool newsletter services have recommended buying shares of General Motors and Ford Motor, as well as creating a synthetic long position in Ford Motor. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy that never wears a dunce cap.


Read/Post Comments (7) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 27, 2012, at 3:30 PM, CluckChicken wrote:

    You go with a rant against TARP over all the other options from this week?

  • Report this Comment On April 27, 2012, at 3:57 PM, whyaduck1128 wrote:

    IMO it's not a rant against TARP at all, more a rant against the gross (and net) stupidity of the GM board.

  • Report this Comment On April 27, 2012, at 3:57 PM, TrackUltraLong wrote:

    CluckChicken,

    A gaffe doesn't have to have happened that week to qualify for this column. Rest assured I have a list of other gaffes for future weeks.

    On a side note, did we set a record for the number of SEC probes this week or what?

    TMFUltraLong

  • Report this Comment On April 27, 2012, at 8:10 PM, CROIC wrote:

    "the company still owes the U.S. taxpayers about half of the $49.5 billion it was loaned under the TARP program"

    This is wrong no matter how many times people repeat it. The equity stake is not debt, so it doesn't involve "owing" anything.

  • Report this Comment On April 28, 2012, at 4:57 PM, Okiehound wrote:

    What? Didn't big O say that they paid back all of their loans. If the commisar says it, it must be true. I think CROIC is right, government motors doesn't have to pay back the equity stake. This was a fascist take over of a private company and now the gov't owns a stake of GM. I will never by a GM vehicle again...no matter how much I want a Camaro or vette. I'll stick with Ford if want an American car.

  • Report this Comment On April 28, 2012, at 5:03 PM, HOGridin wrote:

    When trouble was upon them, Bill Ford and others at the top took $1 in compensation a couple years too. That, my friends is capitalism and free enterprise, not baliout-ism.

  • Report this Comment On April 28, 2012, at 6:08 PM, Jazzenjohn1 wrote:

    Akerson took over GM AFTER it had removed all equity from the shareholders, had crushed the bondholders, had dumped hundreds of dealerships, had refused to pay suppliers what they owed, in short washed of debt and leaned out. Also AFTER they adopted the work rules that Ford and the UAW negotiated. Basically he did almost NOTHING to bring GM around, it was all done by the Government and the bankruptcy courts. Same with Marchionne. He was GIVEN the company, washed of debt, with Billions of taxpayer dollars that went with it. Comparing that to AM and Ford is patently absurd.

    Both Akerson and Marchionne don't even deserve what they got, much less any more. The vast majority of AM's compensation came from increasing shareholder value by it's rise in share price.

    What price rise did Akerson bring?

    What share price rise did Marchionne bring?

    The short answer is NONE and NONE.

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