Buck Naked Politics: Dodd Wants GM CEO to Step Down as Part of Bailout: It's More than just the CEO -- and Why not the Same Condition for Wall Street Firms that Got Tax Dollars?

by Deb Cupples | On Face the Nation yesterday, Senator Chris Dodd reportedly said that General Motors CEO Rick Wagoner should step down as a condition of any sort of taxpayer-funded bailout.

It's a shame that our representatives in Congress failed to insist on such conditions before appropriating $350+ billion to Wall Street firms run by seemingly reckless yet egregiously well-paid people.

Water under the bridge, for the first $350 billion: still, Congress can impose that condition (and others) before appropriating the next $350 billion. Back to General Motors.

GM's CEO is partly responsible for what's wrong with GM. However, watching only the CEO's head roll would be mere symbolism.

Former GM board member Kirk Kerkorian called for "sweeping change" -- including sweeping out some GM board members. Mr. Kerkorian's spokesperson said:

"'Aside from a failure of leadership at the most senior executive management level, GM has five long-serving directors who have been on the board 10 years or more.... They have approved of and overseen many of the moves that have contributed to the company's troubles. They should also resign." (Wall Street Journal via HuffPo)

Amen! As any corporate-corruption junky knows, corporate board members tend to be selected by upper management, and the main criteria are 1) how well they'll rubber-stamp executives' proposals, and 2) how well they'll perform as lapdogs.

That's why so many corporate boards approve huge compensation packages for execs -- even during times of company losses. Apparently, many board members simply forget their fiduciary duties to the shareholders whose money they so carelessly spend.

GM is no exception.

GM lost $2 billion in 2006 and $38 billion in 2007 -- yet, the company's top-4 executives got impressive compensation packages. Check out the table below, which lists the top-4 execs' total compensation for 2006 and 2007 (based on GM's 2008 proxy statement.):

	2007	2006
Wagoner , R.	$14,415,914	$10,191,153
Henderson, F.	$7,608,011	$5,192,838
Lutz, R.A.	$6,894,024	$8,444,043
Cowger, G.L.	$5,092,856	$2,901,320
Total	$34 million	$26.7 million

In short, just four executives in just two years took more than 60 million shareholder-dollars -- despite billions in company losses during those two years. How many ordinary autoworkers could that money have paid for? How much equipment could that money have bought?

I'd love to know how much the other dozens (or hundreds) of managers were paid during those two years, but GM doesn't really publicize such data.

Just to give a little perspective, if your annual salary were "only" $1 million and if a full 50% went to taxes, you'd still take home $41,666 a month. If your annual salary were "only" $500,000 and 50% went to taxes, you'd take home $20,833 a month.

In short, even executives making a mere half-million a year do very well. Given the massive recession we're in, GM's execs and managers should be grateful to have a job at all -- and should be ecstatic at the prospect of making a half-million a year.

Like Mr. Kerkorian, I'd like to see new board members and new management at GM -- and at a bunch of other companies, for that matter (e.g., AIG, Citigroup, Goldman Sachs...).

As a GM shareholder (albeit a small one), I'd like to see new board members and managers remember their fiduciary duty to us shareholders and spend our money judiciously: i.e., in a way that actually promotes company health.

Frankly, I'd like to see it taken a step further: claw back. All GM execs and managers who took bonuses during years that GM took losses should have to give said bonuses back to us shareholders. At least that would be some sort of contribution toward operating costs.

That and it giving bonuses (or other types of extra pay) to the people responsible for driving a company into a ditch just sends the wrong message -- don't you think?

Then there's the issue of perquisites and other spending. We all heard about the fleet of private jets that GM owns and maintains. One of the jets cost GM shareholders $36 million. -- which is more than the combined compensation of GM's top 4 execs during 2007. These machines can't be cheap to store and maintain. Even operating costs are high: for example, CEO Richard Wagoner's flight from Detroit to Washington cost about $20,000.

In 2007 (the year of GM's record-high losses), the human beings making GM's business decisions decided to spend more than $230 million on sports endorsements -- which likely bought some execs expensive seats at sporting events. That $230 million is about 10% of the company's 2006 losses.

I don't know what other questionable expenditures GM's managers have made. The company may or may not have luxury condos for executives' use. It may or may not pay for first-class accommodations when managers travel. It may or may not have a corporate art collection (Enron set aside 20 million shareholder dollars for its art collection).

I don't know about all of GM's questionable spending, because the company doesn't go out of its way to spotlight such things.

I understand why some people are reluctant to spend tax dollars bailing out America's automakers. The Politico tells us, "Sen. Richard Shelby (R-Ala.) threatened a potential filibuster of any attempt to bail out the automakers."

On the other hand, some nasty economic consequences and ripple effects would likely occur if we sit back and allow our nation's automakers to file for bankruptcy protection. Frankly, I don't know what the right answer is.

Memeorandum has commentary.

Other Buck Naked Politics Posts:

* Politicians Fail to Mention Effects of Possible Automakers' Bankruptcy

* Cutting Executive Pay Would Save Jobs

* The Bear that Ate Wall Street....

* Paulson's & Congress's Bailout "Mistakes"

* Lehman Execs Redistribute Shareholder Wealth (to Themselves)

* AIG Execs Redistribute Shareholder Wealth (to Themselves)

* Execs Made Millions While Driving Companies into Ditch

* Someone Please Take the Economy Away from Mr. Paulson (Pt 2)

* Are Bailout Funds Being Misused?