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GM's Salary Caps Hinder Search for Outside CEO

December 6, 2009
2 min to read


DETROIT - Now that General Motors appears to be ready to look outside the company for a chief executive, analysts say the job may not attract the top talent needed to steer it, according to a report by Reuters.


"Bringing in an outsider is often the best way to get a quick and decisive turnaround," said Renny Ponvert, head of Management CV, an executive research firm.

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"That said, it is rarely pretty. It is almost always the most expensive solution in terms of the pay packages -- which is ironic since we know that GM's largest shareholder, the U.S. government, has said that no such pay packages are going to be awarded while we are the largest shareholder."


Base cash salaries are limited to $500,000 for more than 90 percent of GM's top 25 executives under new guidelines set by U.S. Treasury pay czar Kenneth Feinberg. Salaries above $500,000 must be paid in company stock that must be held long-term.


Plus, cash bonuses based on short-term performance are banned, and "golden parachute" severance payments are limited.


In comparison, Ford's top executive Alan Mulally's cash salary from Ford for this year is $1.4 million, although that is down 30 percent from last year. Most of his 2008 compensation of about $13.7 million was in company stock. Shares of Ford closed at $9.01 on Wednesday, up more than 500 percent from its 52-week low $1.50 reached on February 20.


Mulally continues to fly on private aircraft for personal and business travel, unlike his Detroit counterparts who have agreed to fly commercial as part of the government bailouts.

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Also unlike his Detroit counterparts, he did not seek U.S. taxpayer money for a bailout.


GM's 68-year-old chairman, Ed Whitacre, acknowledged earlier this month the pay cap was a problem in finding outside talent, and he urged the Obama administration to allow more wiggle room for GM.


Whitacre, now acting CEO, is hunting for a new chief executive following the abrupt resignation of Fritz Henderson on Tuesday, the second chief executive to depart in eight months.


Henderson became CEO in March after Rick Wagoner was forced out by the Obama administration as part of the U.S. government-funded restructuring of GM.

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