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Some Bailouts Taxpayers Seldom Ever Notice

All across Corporate America, top execs are feathering their own nests at the expense of their employees. The French have a better idea.
The founder of modern management science, Peter Drucker, considered excessive CEO pay an assault on good practice.

The founder of modern management science, Peter Drucker, considered excessive CEO pay an assault on good practice.

By Sam Pizzigati

The founder of modern management science, Peter Drucker, considered excessive executive pay an assault on good enterprise management practice.

Peter Drucker, the analyst who founded modern management science, died in 2005 at age 95. At his death, business leaders worldwide hailed this Austrian-born American for his enormous contribution to enterprise efficiency.

But Peter Drucker also cared deeply about enterprise morality. In his later years, he watched — and despaired — as downsizing became an accepted corporate gameplan for pumping up executive paychecks. Drucker could find “no justification” for letting CEOs benefit financially from worker layoffs.

“This is morally and socially,” he would write, “unforgivable.”

If Drucker were still writing today, he’d likely be even more unforgiving. CEOs these days aren’t just slashing worker jobs to add on to their own rewards. They’re slashing worker pay as well — and no CEO may be benefiting more from shrinking paychecks than Ford chief executive Alan Mulally.

Mulally has restored Ford to profitability, his many business and political admirers never tire of pointing out, without having to take any taxpayer bailout. But Mulally has indeed enjoyed a hefty bailout — from his workers.

Entry-level workers at Ford used to make $28 an hour. That rate fell by half when the auto industry financial crunch first hit five years ago and now sits a bit above $19. And since the crunch all Ford workers, not just entry-level workers, have given up cost-of-living wage adjustments and health benefits.

Ford CEO Alan Mulally has enjoyed a hefty bailout — from his workers.

Auto industry execs have declared these worker concessions as absolutely necessary. Without lower compensation for auto workers, the argument goes, the auto industry would never become “globally competitive.” This same reasoning apparently doesn’t apply to compensation for Ford CEO Mulally.

Ford has just announced that Mulally’s pay package for 2012 nearly hit $21 million. His personal rewards for the year almost doubled the pay that went last year to his chief German rival, Daimler CEO Dieter Zetsche, and even more stunningly dwarfed the $1.48 million Toyota CEO Akio Toyoda took home.

But the magnitude of how well Mulally has done for himself — since Ford workers started coughing up concessions — only swings into real focus when we step back and contemplate the towering pile of Ford shares of stock he now holds. In just over a half-dozen years, CNN Money reports, Mulally “has amassed holdings valued at more than $300 million.”

Among America’s CEOs, of course, Mulally hardly stands alone. The outrageousness of American CEO rewards has been building for some time.

Back in 1986, as Forbes noted last week, America’s ten highest-paid CEOs together pocketed $57.88 million in compensation. In 2012, the top 10 pulled in $616.4 million, about five times as much as the 1986 total after taking inflation into account.

Over that same 26-year span, average weekly wages for America’s workers barely increased at all.

The French people would like to see their government apply a cap on executive pay at all corporations.

So what should we be doing about CEO compensation? In France, the newly elected government of President François Hollande has placed a 450,000 euro cap — about $580,000 — on executive pay at the 52 companies where the French government holds a majority stake.

This cap will essentially limit executives at these publicly controlled companies to no more than 20 times the pay of their lowest-paid workers.

The French people, for their part, would like to see their government apply a similar cap to executives at all corporations, not just those companies where the government holds a controlling interest.

Earlier this month, just after Swiss voters passed a national referendum that bans executive signing and merger bonuses, a major French pollster asked whether people favored or opposed creating a “maximum wage” for all corporate CEOs. A whopping 83 percent of the French public supported the idea.

Sign up for To MuchThe French may have been reading their Peter Drucker. American CEOs, Drucker believed, should earn no more than 20 or 25 times their worker pay. Last year, in Great Recession-ravaged Michigan, Alan Mulally pulled in over 500 times the pay of Ford’s lowest-paid workers.

  • JPSnoopington

    Displeasure over trivial issues never ceases to amaze me. If you don’t want to punch the time clock at Ford don’t do it. Punch the time clock at GM or Toyota instead if that’s what you want to do.

    As far as what an investor wants to do, if I want to buy Ford I will. it sure beat the GM alternative when the government was running it and stiffed the bondholders in favor of the union. Glad I wasn’t part of that scam on either the fleeced or thievery side.

    Whether Toyota or Daimler are better choices for the investor is up to each individual. I simply know Mulally made me more than a few bucks over the last few years. I hold no Ford stock as of today. Has nothing to do with his compensation, I simply made my money and moved on to make money elsewhere. Hopefully.

  • allen

    why do u post here? why not post on an investment website … your contributions are utterly devoid of the whole premise of this website.

    Are you a right wing troll? Who’s payroll are you on? The Koch Brothers?

    • JPSnoopington

      Now spelling and punctuation aren’t your only problems. You are intolerant as well. Quite revealing yet so sad. And if you really need to know, I am self-employed, seeking nothing other than life, liberty and the pursuit of happiness. They after all are the rights I was born with. Same as everybody else.

      Something is happening here but you don’t know what it is, do you Mr. Jones?

      • allen

        go away TROLL ! this website is for americans who want to understand the truth

        • JPSnoopington

          No, this site seems to be for people that can’t handle reality. That’s what makes it so entertaining. Very similar to watching a few episodes of Mr. Ed, except Mr. Ed was smarter than the characters here.

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