Ford Ups Mullaly's Bonus
|Topics: Alan Mullaly, Ford Motor Company
March 2, 2007
The Ford Motor Co. said Allan Mullaly, the company’s new CEO, will be getting an additional $1M bonus. The board of directors of the company has approved a $6 million stock option bonus, $1 million more than what was previously promised for Mullaly.
Ford said Mullaly’s bonus was based on his performance during the first several months of working in the company. For 2007, his total compensation package could add up to $16.5 million.
According to documents filed with Securities and Exchange Commission, Ford’s board also approved cash payments to other senior executives to compensate them for a bonus program the company is scrapping in favor of a new compensation plan.
The news about Ford’s payouts came as thousands of salaried workers who signed up for buyouts or early retirement packages bid farewells to their friends and workmates. The announcement was also close to the reporting of the 2007 $12.7 billion loss report of the automaker. "(It was a) sad day today, lots of people I knew left," one worker said. "Many of the engineering offices look like Swiss cheese with all of the empty cubicles that have opened up."
Ford spokeswoman Becky Sanch acknowledged the timing was less than ideal. "There's no ideal time to separate for our employees. Today's announcements were driven by SEC disclosure requirements," Sanch said. "Regarding the overall pay, the company has always said it is committed to providing employees with competitive pay and long-term incentives," she further notes. The announcements were critical and demanded from the company. No amount of force and efficiency from EBC Active Brakes Direct could prevent the revelation. Timing is no moment because it is not one of the opportunities afforded the company.
Mulally's bonus is part of a compensation package potentially worth more than $35 million for 2006 and this includes one-time hiring bonuses. The $6 million stock option grant is $1 million more than the baseline bonus promised by the board when he was hired last fall. The bonus comes in the form of stock options and is payable over the next three years.
Ford is now preparing to enter negotiations with United Auto Workers (UAW) and is anticipated to ask union workers to accept sacrifices to help the company rebound. UAW President Ron Gettelfinger has been highly critical of executive bonuses proposed by bankrupt Delphi Corp. according to analyst Bradley Rubin of BNP Paribas, Wall Street is unlikely to care much either way. "What's a million? Plus or minus a million dollars is not going to determine whether Ford succeeds or fails," Rubin said. "You've got to pay the guy for the risks he's taking."
Rubin added that Mulally quit his job as the CEO of Boeing Co., a commercial aircraft division, to come and rescue the ailing Ford. The transfer was made at a time when the company has archrival Airbus SAS against the ropes.
Ford's board also changed the performance-based bonus plan for its senior executives. This is to reflect the "one plan, one team" approach favored by the new CEO. The plan will base executive bonuses on the same metrics as other salaried workers. Nevertheless, since the current plan was already part of executive contracts, the company agreed to buy them out with a one-time cash payment.
The company did not disclose the actual amount involved in the buy out transaction. Their new bonuses for the senior executives, which can total eight times their base salary depending on how close they come to meeting the new goals, will be deducted by the amount of that payment.
Ford said the new bonus plan will be more consistent and allow each white-collar worker to be judged by the same standard. The new bonuses will be paid in equal shares of stock options and restricted stock units.
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