During the financial crisis, many executives’ pay was stifled, reduced, or even withheld
CASE STUDY
United States Auto Industry Back on Top … of CEO Pay
During the financial crisis, many executives’ pay was stifled, reduced, or even withheld. Among the hardest hit was the U.S. auto industry. Shareholder groups, union leaders, political officials, and the general public all demanded change in the way auto industry executives were getting rich while their cars were getting poor. For example, Ford made some major cuts for its executives and its employees.
This is why people were shocked to find out that for 2011 the CEO of Ford, Alan Mulally, was to receive $56.5 million in stock awards. Even today, it is one of the richest pay packages ever given to a top executive in the auto industry—and it is even after all the clamor over sky-high executive paychecks. Is it too much?
That depends on who you ask. For most, it seems unreasonable that a boss would make more than 1,000 times the pay of the average worker. However, if you ask Ford workers who have seen Mulally steer Ford back from the edge of bankruptcy, they probably would not complain too much. If you asked Ford’s shareholders, it would be hard for them to overlook the fact that Ford shares have gone from $1.56 when Mulally first took over to $14 a share. If you ask Ford dealers, they may be too busy selling one of the strongest lineups of cars around to answer.
Of course, no one really knows if Ford would have been sitting in such a good position regardless of Mulally. On one hand, there are plenty of factors, such as a national economic recovery, that led to Ford’s improvements that Mulally clearly could not have had a finger on. On the other hand, there are plenty of companies that would be willing to pay $50 million if they knew their company would rebound as Ford has under Mulally.
United States Auto Industry Back on Top of CEO Pay
Answer the following questions:
1. Do you think CEOs and other executives are worth the compensation packages they receive? Why or why not?
2. Do you agree with Peter Drucker that corporate executives should receive compensation packages no larger than a certain percentage of the pay of hourly workers? Explain.
3. Will the Dodd–Frank Wall Street Reform and Consumer Protection Act giving shareholders the right to vote on executive pay influence the size of these packages in the future?
The following requirements must be met:
Write between 1,000 – 1,500 words using Microsoft Word in APA style.
Use an appropriate number of references to support your position, and defend your arguments. The following are examples of primary and secondary sources that may be used, and non-credible and opinion based sources that may not be used.
Primary sources such as government websites (United States Department of Labor – Bureau of Labor Statistics, United States Census Bureau, The World Bank), peer reviewed and scholarly journals in EBSCOhost (Grantham University Online Library) and Google Scholar.
Secondary and credible sources such as CNN Money, The Wall Street Journal, trade journals, and publications in EBSCOhost (Grantham University Online Library).
Non-credible and opinion based sources such as, Wikis, Yahoo Answers, eHow, blogs, etc. should not be used.
Cite all reference material (data, dates, graphs, quotes, paraphrased statements, information, etc.) in the paper and list each source on a reference page using APA style. APA resources, including a template, are provided in the Supplemental Materials folder.
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