Few examples stand as living testimony to the bankruptcy of the current model of CEO and top management compensation more than what was announced by Ford Motor Company today. For the privilege of presiding over a record $12 billion loss in 2006, the top seven in Ford’s executive suite received a whopping $62 million. Bill Ford, under whose CEO tenure the huge loss was posted, was paid more than $10 million. Ford’s boardroom party comes after the company announced plans earlier this year to close 14 North American plants and lay off thousands of workers. If this was the cost of failure, you really have to wonder what the price of success would have been. Somebody needs to reconnect Ford’s board to planet Earth.
I am aware that Mr. Ford received no salary or bonus in 2006. The $10 million figure was mainly in the form of stock options. Are stock options a form of compensation? Yes. Are they an expense to the company? Yes. Did the company suffer record losses mostly under Mr. Ford? Yes. So let’s not dwell too long on Mr. Ford’s spirit of altruism.
But the madness doesn’t end there. CEO Alan Mulally, who joined Ford last October received $28 million —and that’s for just four months on the job. How does a company pay a CEO that much for four months when it has posted a record $12 billion loss? I guess you start with a bunch of pampered directors who are so out of touch that they think such figures will go undetected by the unions from whom it is said Ford must negotiate concessions if it is to survive. It needs something else. It needs a CEO and executives who are prepared to share the sacrifice investors and employees are making —not be the first into the golden lifeboat. And it needs directors who can stay awake long enough to apply good judgment and common sense to the compensation decisions they are making. At least the Titanic changed direction when the icebergs were spotted. At Ford, they still seem to be steering headlong into catastrophe.
Ford has consistently misread the consuming market’s signals. One can hope that this iconic American business institution will prevail. But the pay it doled out to its top brass is an another indication that the disconnected and bankrupt thinking that brought the company to its current state of woe is still at work in Ford’s boardroom.