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Lessons not learned from the bubble

In early March, Ford Motor Co. announced it had handsomely rewarded two of its top officers for the company’s turnaround with tens of millions of dollars.


May 13, 2011
by Ken Lewenza

Ken Lewenza is the president of the Canadian Auto Workers union.

In early March, Ford Motor Co. announced it had handsomely rewarded two of its top officers for the company’s turnaround with tens of millions of dollars.

For their efforts, Ford gave chief executive officer Alan Mulally $56.5 million in stock and executive chairman Bill Ford $42.4 million in shares. While Ford’s turnaround is great news for the auto industry, this announcement begs further reflection.

I, like many members of the Canadian Auto Workers (CAW) union and the public, reacted angrily to this news. Many of us find it obscene that any executive can take home many tens of millions of dollars in personal compensation as a result of the performance of an entire large corporation. There is no rationale for such excessive compensation, however great the individual’s talent. Indeed, this is an example of the greed and excess that contributed to the bubble that preceded the financial collapse in the US and the resulting global recession.

Have we learned nothing from that experience?

While average working Canadians are still experiencing the lingering effects of the recession, top-level executives have barely felt the pinch – in fact, the 100 best-paid CEOs are as comfortable as ever. In 2009, this group enjoyed salaries 155 times higher than average income earners.

A recent study by the Canadian Centre for Policy Alternatives entitled, Recession-Proof, Canada’s 100 best-paid CEOs (www.policyalternatives.ca) found that the nation’s top paid CEOs pocketed an average of $6.6 million during the darkest period of the recession – a stark contrast from the total average Canadian income of $42,988. But the CCPA says that huge number understates the real story. A change in corporate reporting was introduced in 2008, so now we only have a conservative statistical estimate of the stock options that make up about one third of a CEO’s 2009 pay. In fact, the public will never know how much most of these CEOs actually got paid.

And that’s only half the story. These CEOs are sitting on $1.3 billion of stock options they haven’t yet cashed. That’s about $2 in future income for every $1 they declared in 2009.

Mulally appears to be included in a group that has not been touched by the recession. These inflated compensation packages are particularly offensive when compared to the lived reality of workers employed by the corporation and the tens of thousands of workers who have been laid off by the company across North America.

Many sacrifices
Of those still working – members of the CAW and our counterparts in the United Auto Workers union – Ford demanded many sacrifices. Adding to this outrage is the fact Ford will close its St. Thomas, Ont. facility later this year. So far in Canada Ford has approximately 1,300 workers on lay-off.

Autoworkers and their communities have experienced incredible loss, insecurity and belt-tightening in recent years. When Ford closes its St. Thomas plant later this year, another 1,300 hard-working families will be devastated.

It’s simply beyond me how Ford’s board of directors can pay out $56.5 million to one individual while the company is jeopardizing the future of thousands of Canadian families.

This specific example relates to the compensation of two officers at Ford Motor Co., yet it’s a situation that’s endemic to the corporate sector where greed and excess continue to trump common sense and humility, despite what recent events should have taught us. Those who lavish such compensation upon top executives should know better.

Ken Lewenza is the president of the Canadian Auto Workers union, which represents 225,000 workers across the country in 17 different sectors of the economy. E-mail cawcomm@caw.ca.