In an economy with very few bright spots, earlier this year we heard some great news out of Detroit.
DETROIT (AP) — General Motors earned its largest profit ever in 2011, two years after it nearly collapsed.http://news.yahoo.com/...
Strong sales in the U.S. and China helped the carmaker turn a profit of $7.6 billion, beating its old record of $6.7 billion in 1997 during the pickup and SUV boom.
GM is a vastly different company than it was back then. It's smaller, has less debt and its contract with the United Auto Workers is less costly. But it took a $49.5 billion government bailout and bankruptcy protection in 2009 to cut its bloated costs.
So what's with the headline "Government freezes GM CEO's pay"?
The pay freeze has everything to do with that final paragraph above. Namely:
It took a $49.5 billion government bailout and bankruptcy protection in 2009 to cut its bloated costs.General Motors has repaid about 50 percent of their bailout money, which means they still owe us about 50 percent. So until we get paid, their top 25 executives will remain in the lower echelons of highly-compensated top executives. Forgive me for not shedding a tear.
Government freezes GM CEO's paySilly government. Don't they know how business is supposed to work?
By Charles Riley @CNNMoney April 6, 2012: 5:52 PM ET
NEW YORK (CNNMoney) -- The Treasury Department announced Friday that it has frozen the pay of top executives at the three firms still on the hook for "exceptional assistance" from TARP.
The firms -- AIG (AIG, Fortune 500), Ally Financial and GM (GM, Fortune 500) -- all received bailout money from the government during the financial crisis, but have yet to fully repay the funds.
It is the second straight year the government's special master for TARP compensation, Patricia Geoghegan, has taken this step.
The special inspector was given oversight of top salaries at bailed-out firms as public outrage grew over how taxpayer dollars were being used during the financial crisis.
For 2012, each CEO's pay will be frozen at last year's levels, and cash compensation is limited. The bulk of CEO earnings will be tied to performance, in the form of stock.
The pay freeze will be particularly hard to take for management at GM, which earlier this year reported very strong profits.
GM reported a record annual profit attributed to common shareholders of $7.6 billion in February. Meanwhile, the company's stock has risen 22% since the start of 2012.
[Ford] Chief Executive Officer Alan Mulally received $29.5 million in total compensation, according to the automaker's proxy filing Friday. The package, which includes $2 million in salary and a $5.46 million cash bonus, makes Mulally the highest-paid U.S. auto executive. The UAW said Friday that performance of Ford stock doesn't justify his compensation....The government's radical compensation philosophy that requires its executives to justify their salaries through performance and adding value for we the people, their stockholders, is an outrage to many top executives. As a result, General Motors has had some trouble recruiting and keeping top talent.
United Auto Workers Vice President Jimmy Settles said Friday that Ford's stock price, which fell 36 percent in 2011, doesn't justify what Mulally was paid.
"It's as if there's an echo in here," said Settles, who directs the union's National Ford Department.
"As UAW President Bob King said last March on this very subject: Alan Mulally's a good CEO. But it's hard to justify the big salary and huge stock options he received for 2011, especially when the company's stock isn't performing."
The United Auto Workers agreed to freeze base wages for veteran Ford workers under the four-year contract ratified in October."
From The Detroit News: http://www.detroitnews.com/...
General Motors CEO Daniel F. Akerson is expected to earn $9 million in stock and salary this year. Ally Financial's CEO Michael A. Carpenter is set to earn $9.5 million in total compensation. AIG CEO Robert Benmosche will make $10.5 million.http://online.wsj.com/...
Akerson has criticized the pay limits, saying GM is losing some of its top talent in its executive ranks because of the government-imposed rules. The Detroit automaker received $49.5 billion from the government in 2008 and 2009.
"It's the reality we have to live with, as long as we're under the restrictions," said GM spokesman Jim Cain.
"It's the reality we have to live with..." What. A. Trooper.
I do not know how this spokesman summoned the nerve to shape his lips to talk about his "reality" in a nation where millions of his fellow Americans would do anything to get even a part-time job flipping burgers, at minimum wage, just so they can migrate from being nearly homeless to being merely broke. But such is the detachment from actual reality that many one percenters have to this day.
The General Motors CEO can take comfort in the fact that he's not alone in having to muddle through with a salary in the low millions.
CEO compensation flat at three TARP firmsThere's a way to remedy this. Just do what Bank of America did. Pay us back so you can get paid.
NEW YORK (MarketWatch) -- Overall compensation for chief executive officers at AIG , Ally Financial and General Motors Co. has been frozen at 2011 levels, according to a statement Friday from the U.S. Treasury Department.
The three firms received government cash under the Troubled Asset Relief Program. AIG has paid back about 75% of its obligations, and GM has paid back nearly half. Ally Financial has paid back about one third.
Of the 69 top executives at the three firms, cash compensation dropped 18% and their total direct compensation decreased 10% from 2011 levels. For the top 25 executives in both 2011 and 2012, cash compensation increased 1% and total direct compensation dipped 2%.
Executive compensation restrictions have served as another way to increase the chances that TARP funds are repaid. The restrictions made it more difficult for Bank of America (BAC) to find candidates to be the banking giant’s new CEO. As a result, BofA raised $19 billion in new capital... in order to be in a position to immediately repay its $45 billion in TARP loans. I do not know anyone who expected the entire $45 billion to be repaid this quickly, and therefore it appears the pay restrictions did exactly what they were intended to do: give TARP recipients incentive to repay the money as fast as they could.http://seekingalpha.com/...
Another option is to elect Republicans. They do not care about accountability. (EDITOR's NOTE: I am not advocating electing Republicans. This is merely a rhetorical flourish. I do not like elected Republicans in any way, shape or form--whether it be solid, liquid, gas or whatever Mitt Romney is.)
The core difference between the Bush and Obama administrations in terms of how they doled out government bailout funds was what, if any, terms came with getting the money.So GM and the other TARP deadbeats still have some repaying to do before they than can rejoin the more obscene profits club, but in the meantime we will keep them on a short leash until they pay us back. Change I can believe in.
Former Treasury Secretary Paulson gave out the first half of TARP funds with no strings attached. Secretary Geithner, conversely, wanted to make sure the government funding came with restrictions, including how much executives of bailed out firms could earn while they still owed the taxpayer billions of dollars. Skeptics argued that this was a way for Washington to gain control of the private sector, but in reality it really was just a way to maximize the odds that the government got repaid.