Penny pinching at Ford?
Remember last November, when the auto companies’ CEOs flew in their corporate jets to beg the Senate Banking Committee for a taxpayer-funded bailout? After that public relations fiasco, the CEOs assumed contrite tones, assured Americans that they “got it,” and promised to start running their companies in a more frugal manner.
As proof, when the CEOs went back to D.C. on December 4 to ask for “bridge loans” (or, in the case of Ford (F), a $9 billion line of credit that it could use if necessary), the PR folks made sure everyone knew that the CEOs drove to the hearings and that Alan Mulally was working for just $1 a year. (According to the proxy, however, he earned $2 Million in salary last year and more than $13.5 Million in total compensation.)
But Ford’s frugality appears to be a bit of exaggeration, based on the preliminary proxy that it filed Tuesday. It’s true that the company disclosed some cash-saving measures such as a 30% reduction in Mulally’s salary for 2009 and 2010, (even if it’s not clear why that number differs from the $1 mentioned in the article), no merit increases for executives or salaried employees in 2009, a suspension of matching employees’ contributions to their 401(k)s, and an elimination of the cash portion of Directors’ annual fees. And it describes the measures as not “merely symbolic,” but “necessary.”
Yet those actions are inconsistent with others that the company continues to take. For example, while Ford’s filing says that it is “in the process of selling [the] corporate aircraft,” it adds:
“Company policy does not allow Mr. Mulally to fly commercially due to security concerns. The Company will pay the charter costs of Mr. Mulally’s use of private aircraft for his business and personal travel. Mr. Mulally’s family will be allowed to accompany him on trips when he travels on private aircraft. In addition, the Company will pay the cost of coach-class commercial aircraft flights for his family when their travel is at his request.”
The filing also says: “[F]or retention purposes the Company pays the costs, including first class commercial airfare, for personal travel for Mr. [Mark] Fields to and from his home in Florida. The Company continues to provide tax relief as a result of the imputed income associated with Mr. Fields’ arrangement.” There’s also the fact that Ford agreed to continue paying for Mulally’s temporary housing near corporate headquarters — something that was just renewed in September 2008, or just two months before Mulally and other executives came to Congress, hat in hand. Last year, that perk cost the company $109,697.
If frugality at Ford is really the goal, there’s more work to be done.
Photo source: I. M. Properties
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Posted in Tags: bailout, CEOs, Congress, high flyers, perks, proxy |
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March 26th, 2009 at 11:29 am
You need to listen to what Warren Buffett (you know, the great flagrant spender) says about the use of corporate jets or chartered flights. When you are a CEO of a company and you make $x million per year, do you think shareholders (who own the company) really think he/she should be wasting their time by traveling in a car? Granted, I don’t care about his family or why they should ride in the jet or why he should be flown to his home in Florida, but it is very shallow to think that someone who leads a billion dollar company, in any industry, should have to waste their time thumbing for a ride.
March 26th, 2009 at 1:38 pm
I wasn’t suggesting that Messrs. Mulally or Fields travel by car. In fact, there are options to travel by air that do not require either private jets or first-class airfare.
However, the larger point is that Ford’s PR spin (that it has become a frugal company) does not square with how it continues to spend its money. That point seems especially relevant when a company seeks wage concessions from employees and stops contributing to their 401(k) accounts in the name of “necessity.”
March 26th, 2009 at 1:49 pm
FYI, the $1 salary was promised only if Ford had to take government loans. To date, the company has not done so, nor is it our intention to do so unless there’s a catastrophic event in the industry or the economy worsens.
Scott Monty
Global Digital Communications
Ford Motor Company
March 26th, 2009 at 3:05 pm
Mr. Monty,
While you are indeed correct that the press release says that Mr. Mulally would work for $1 a year if Ford should have need to access the government line of credit, it was couched in a bit of obfuscation. The exact sentence runs thus:
“In addition, Ford CEO Mulally announced that, should Ford need to access funds from a potential government bridge loan, he would work for a salary of $1 a year – as a sign of his confidence in the company’s transformation plan and future.”
If Ford needed to tap that line of credit, then that would mean its “transformation plan” wasn’t working out all that great so I’m not quite sure what sort of show of confidence that would offer.
Our business is falling apart, we had to relent and take cheap government financing, but our boss is going to work for just $1 a year to show things are going great! I’ll assume that if Ford does have to borrow the taxpayer’s money, Mr. Mulally will be returning whatever salary he had been earning to the company.
So, yes, Ford is doing as it said it would, but let’s also agree that the additional verbiage at the end clouds the issue. A true show of confidence in turnaround plan would have had Mr. Mulally working for $1 from the get-go without the need for any ambiguity.
With that said, I hope Ford continues to build on its strength and ultimately succeed.
Rich Duprey
March 26th, 2009 at 3:56 pm
Mr. Monty: Thank you for the clarification.
Mr. Duprey: We concur with your wish for Ford’s ultimate success.
March 27th, 2009 at 11:42 am
Sacrificing security in the name of frugality seems like a dumb trade-off. While you may question whether there should be actual security concerns for a particular person in question, let’s not downplay security as somehow contradicting stated intentions of frugality. After all, if your child were traveling to a big city, would you rather have him/her pay more to stay in a nicer hotel in a safer part of town, or have him/her save you some money by staying in a cheap motel in the downtrodden part of town?
And, yes, the company may be selling the company plane, but they can still hire private jets to fly someone around. Ever hear of NetJets? A lot of companies (and individuals) that don’t have their own planes use these kinds of services for private travel, which I think can be justified. No reason to have your Chairman, CEO or CFO stuck sitting by the gate waiting for a delayed flight, or having to rearrange their schedules if a flight is canceled, when they could be conducting business during that time.