General Motors Chief, Richard Wagoner, is receiving a 33% raise for 2008. His base salary is jumping from $1.65 million to $2.2 million and he is also receiving another $1.68 million in equity compensation for his performance in 2007. To refresh your memory, GM lost $38.7 billion in 2007 -- the largest annual loss ever recorded by an American company. And in early February, in an effort to trim ongoing losses, the company offered buyouts to 74,000 employees - its entire US hourly workforce. I wonder if the GM Board authorized the employee buyouts in the same meeting during which it approved the Compensation Committee recommendation to increase Wagoner's pay. Let's hope there was at the very least a coffee break between these two Board agenda items.
In other compensation news, the Boards of home builders KB and Toll Brothers are inventing new methods to richly reward their CEOs, even as their operating profits and stock price drop amidst an industry slump.
In direct contrast to General Electric -- which ties CEO pay to shareholder returns, Toll has decided to replace a similar performance plan with a bonus method based entirely on subjective criteria. This kind of bonus plan can be summarized as, "Our company performance sucks but we like you and don't want to penalize you...."
The same lack of pay-for-performance rigor is occurring at KB. Its Board awarded KB CEO, Jeffrey Mezger, a "discretionary" bonus of $6,000,000 for 2007. Under the Company's official bonus plan, which is tied to operating performance, he would have not received any bonus for last year. KB stock fell almost 60% in 2007.
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