"You know, today, women make up about half our workforce, but they still make 77 cents for every dollar a man earns. That is wrong, and in 2014, it's an embarrassment. Women deserve equal pay for equal work.” -- President Barack Obama, State of the Union, January 2014
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"Our success should depend not on accident of birth, but the strength of our work ethic and the scope of our dreams. It's how the daughter of a factory worker is CEO of America's largest automaker." -- President Barack Obama, State of the Union, January 2014
In his State of the Union address last week, President Barack Obama applauded the success story of Mary Barra, 52, the new chief executive of General Motors (NYSE:GM) who sat with First Lady Michelle Obama. Barra became the first female CEO of the global automaker after a 33-year career at GM.
The White House said in a statement that State of the Union guests like Barra who "have been invited to sit with the First Lady represent the stories of millions of Americans across the country, who are working hard to better their communities, improve their own economic outcomes and help restore opportunity for all."
Trouble is, Barra is not even getting 77%, but less than half, 48%, of the pay of GM's outgoing male CEO who had no prior experience running a car company. Barra replaced former Carlyle Group executive Dan Akerson, who ran the automaker after it got a massive $49.5 billion taxpayer bailout. The U.S. Treasury finally sold its remaining stake in GM last December, but at a $10.5 billion loss for U.S. taxpayers. At that time, Akerson said GM should not repay taxpayers the $10.5 billion because "the die was cast" when the Treasury Department opted to take shares in GM instead of giving it more loans.
As it stands now, Barra will get $4.4 million in total compensation, including a base salary of $1.6 million, in 2014, according to GM's filings with the Securities and Exchange Commission. Her pay currently trails outgoing CEO Akerson’s higher 2013 compensation by 52%. He got an estimated $9 million, with a larger $1.7 million base salary and $7.3 million in stock awards.
Even in his current role as an outside senior adviser to GM, Akerson's new $4.68 million compensation would still outstrip Barra's pay package.
Barra’s lower pay also undercuts GM’s statements in its 2013 proxy filed with the SEC, in which the automaker said its executive pay is "based on the tenure, experience and specific responsibilities of the incumbent” executive. Despite paying Barra less, GM blamed Treasury restrictions for not being able to pay Akerson even more when he was CEO, Treasury rules GM complained were "out of step with market practices" (see below).
So, given the fact that Barra has a longer tenure -- 33 years -- at GM, versus Akerson’s zero years of experience in the auto industry, why does GM think Barra’s value as its CEO is currently worth 52% less than Akerson's?
And why didn't anyone at the White House catch this controversy before inviting Barra to sit with the First Lady while the President decried lower pay for women in his State of the Union address?
Barra actually made more money as GM’s senior vice president of global product development than she will as its CEO, according to GM’s SEC filings. In her prior role, Barra got $4.94 million -- a base salary of $750,000, stock awards of $3.91 million, and $279,200 in other compensation and perks in 2012.
The White House didn’t return calls for comment. A GM spokesman said: “What you’re a seeing now are two aspects of Mary’s compensation in 2014” and that “we won’t know until shareholders vote this June on Mary’s long-term incentive compensation,” as to whether her compensation could increase. For comparison sake, out of Barra’s $4.94 million pay package in 2012, $250,771 of that was pension and deferred compensation. Akerson got $9.3 million in stock awards that year, versus Barra’s $3.91 million.
Here’s the back-of-the-baseball card rundown on their CEO pay.
Dan Akerson, former CEO, GM
Auto industry experience: None
2010: $2.5 million, "mainly for his four months as the company's top executive,” reports indicate, since he was hired late in the year (estimated $10 million annualized).
2011: $7.7 million, but GM "complained in its annual proxy statement...that pay for Akerson and other executives isn't competitive with similar companies because of government-imposed limits,” reports note.
2012: $11.1 million
2013: $9 million
2014 (retired, outside consultant): $4.68 million
Mary Barra, CEO, GM
Auto industry experience: 33 years at GM
2014: $4.4 million
Barra’s total compensation package for 2014 won't likely be known until June, when GM shareholders are expected to approve a new compensation plan for senior executives. It's unclear at this point whether Barra could get more compensation, say, if GM does an additional stock offering.
The story gets even more curious when you read the details in GM’s 2013 proxy about how it blamed the Treasury Department’s "rigid, out of step" restrictions on executive compensation at bailed-out companies for limiting Akerson’s pay and its "growing concern" its pay packages wouldn't attract "critical" executives:
"As a result of the limitations on the compensation committee’s flexibility in establishing executive pay levels or the mix of pay for our top 100 employees, our mix of cash and equity compensation and fixed and incentive compensation is out of step with market practices and does not support our desired pay-for-performance philosophy. Because of the rigid approach mandated by the UST [U.S. Treasury] for our 25 most senior executives, our ability to implement a robust, performance-driven compensation program remains constrained.”
It goes on: “Currently, annual and long-term incentives are strictly limited by the rules that the UST [U.S. Treasury] has promulgated. During 2012 and through today, we increasingly recognized that our need to offer competitive pay, particularly a more appropriate mix of annual cash and non-cash compensation is a growing concern.”
And GM’s proxy says: “Such constraints on our ability to compensate critical personnel in a competitive manner inhibits our ability to align incentives and rewards with our business plan…Absent UST [U.S. Treasury] constraints, we generally target our overall compensation levels to be at or near the median of the comparator group (executive peers at other companies), while recognizing that some individual roles may be positioned above or below the market median based on the tenure, experience and specific responsibilities of the incumbent."
So, given the fact the U.S. Treasury has sold its stake in GM, meaning there are no “pay restrictions,” and given Barra’s tenure, why is Barra making 48% of Akerson's compensation? Shouldn't it be a "growing concern" that Barra's lower compensation is "out of step with market practices"? And why didn't the White House know?