In the great scheme of CEO pay, an award of $58.3-million in stock is not really very much – not when we’re talking about the CEO of Ford Motor Co., with annual revenue of $136.3-billion and a 2011 pretax profit of $8.76-billion (all figures in U.S. dollars).
Ford Motor CEO Alan Mulally will just have to make do on that rich 2009 stock incentive award, plus his 2010 salary of $26.5-million and whatever his yet-unannounced total 2011 compensation turns out to be.
So will VW Group CEO Martin Winterkorn, whose pay last year nearly doubled to $23-million in fixed salary, bonuses and profit incentives. Winterkorn might want to argue that he is underpaid, if anything. Consider: the VW Group last year posted an operating profit of $14.8-billion on total revenues of $207.2-billion.
Mulally, of course, is being rewarded for Ford’s impressive turnaround since he came on board in 2006. Ford has earned $29.5-billion in the last three years, after $30.1-billion in losses from 2006 through 2008.
But Winterkorn might want to argue that with VW now the world’s second-largest car company – the Group’s sales last year totalled 8.3 million – he should be rewarded on par with Mulally. He won’t win that argument, though.
That’s because U.S. executives are more likely to be compensated largely based on stock performance. Case in point: Mulally has been awarded stock worth more than $100-million the past two years, according to Automotive News.
As Ford spokesman Todd Nissen told Bloomberg: “Ford's stock was $1.96 a share at the time of the 2009 awards, and is over $12 a share today. That is a more than a 500 per cent increase, which benefits all stakeholders in the Ford turnaround.”
Ford is now growing, adding employees and expanding around the world. Six years ago, when Mulally came aboard, Ford was essentially bankrupt.
VW, for its part, is on track to become the world’s largest auto maker by 2018, if not sooner, the company said in its most recent annual reporting. The company says its aims to match last year’s profits in 2012, as well.
Now compare the pay packets of Mulally and Winterkorn to John Hammergren, CEO of the pharmaceutical company McKesson. Forbes reports that he is currently the highest paid U.S. CEO, with total compensation of $131.1-million. He leads a company with net income of $1.2-billion. Hammergren makes more than five times as much as Winterkorn, leading a drug company that earns less than one-tenth that of the VW Group.
Or how about Ralph Lauren, who was paid $66.7-million leading Polo Ralph Lauren, with a net income of $630-million. Mulally is paid less than Ralph Lauren, even though Ford is nearly 14 times more profitable.
The point is, Mulally and Winterkorn are hardly overpaid compared to many other CEOs, particularly those running much smaller, much less complex companies.