March 25, 2013 |
This article orignially appeared inToo Much
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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.
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.
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.
The 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.
Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.
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