Joseph Lee's Perspectives
My view of the world
Executive Pay

An article in the Yomiuri Online reported that Toyota announced its executive compensation for the 36 most senior executives totaled approximately $37 million for the fiscal year ended 3/31/08.    This included bonuses.   So that averages out to about a million dollars each.   This was a 17% jump from the prior year.

The Yomiuri was kind enough to offer an explanation--that Toyota has seen record profits for the last six years.  Guess that explains such a bump.

I figured that with such a great record, the Toyota executives truly deserve a pat on their backs.   But I know that they're probably not the highest paid, since the folks in Detroit seem to do a better job at paying themselves even when they make a lot of SUV's that aren't doing too well these days.

So I checked the web-site for GM's executive compensation.  Unfortunately, I could only find data for five out of their 16 big shot executives.  The CEO made close to $15 million.  The COO made   $7.6 million.  Wow!   When I added up the five for which I had information, the number totalled $40 million.   And at Toyota, that would have paid all 36 of their executives.

Granted these folks in Detroit probably live in more expensive homes than the small huts occupied by their Japanese counterparts, but you would think that there is some sense of relationship between pay and performance.

I wonder what a counseling session for one of these executives would be like.  

"Congratulations, Ricky (Rich Wagoner).  We lost so much money this year, $38 billion to be exact, that we're going to increase your salary 60% so that you would have an incentive to work harder next year.  Is $15.7 million enough?"

"Gee, boss, I thought that we weren't doing all that great, but if you're giving me a raise, I must be doing something right.  Maybe I'll do more of the same thing next year and build more of those bigger trucks."

I'm of the opinion that executive compensation in Japan is too low, but that still does not excuse the runaway compensation hikes of US CEOs, and the inability of board members, many of whom are executives at other firms, to rein in the inexcusable raises.

I was once told by a very senior member of an accounting firm that the most important characteristic of a board member is neither the understanding of the industry not the level of experience.  It is the ability to ask questions and to challenge management, including the CEO and the Chairman.

I wonder who was doing the compensation review at General Motors.   Maybe they didn't care too much about losing $38 billion.   Maybe they work at companies where they don't want people judging them on their own performance.

2008-06-05 12:45:05 GMT
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