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!
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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