I was reading the Beck and Fordahl article, “CEO pay climbs despite companies struggles” when three sentences leapt off the page at me.
Rick Wagoner, CEO of General Motors, (GM) announced this month the company had to close four plants that make trucks and SUVs because of lagging demand as fuel prices soar. That followed the posting of a $39 billion loss in 2007, a year when its stock price fell about 19%. And Wagoner? His pay rose 64%, to $15.7 million.
Did I read that correctly? GM posted a $39 billion loss in 2007 – well actually $38.732 billion but who is counting – and that is after posting a $1.978 billion loss in 2006 and $10.567 billion loss in 2005. The company is also closing four plants, which is expected to affect approximately 2,500 employees – while some may be able to transfer into positions vacated by approximately 19,000 employees who are expected to accept early retirement and buyout offers. And while GM and its employees struggle through a very tough time, Rick Wagoner’s pay rose 64% – a truly amazing figure, particularly in light of the current state of the company.
And while, Wagoner announced that the plant closings, transition to smaller and electric cars and other cost-saving measures will save the company close to $15 billion a year, those savings are not expected to be realized until 2010. While those changes may have a dramatic impact on the business, the company’s recent performance does not warrant an increase in pay for Wagoner – surely not a 64% increase.