In an era when executive pay is under heavy scrutiny, and the 99 percent are pitted against the 1 percent, Ford Motor Co. CEO Alan Mulally is in the spotlight for receiving $58.4 million in company stock as part of a 2009 long-term incentive pay package, the automaker disclosed this week.
United Auto Workers members and leadership who criticized Mulally's pay package last year for excess may not agree, but the CEO who arrived at Ford in 2006 seems utterly worth it. And that's not something you can say about a lot of CEOs.
"Our compensation philosophy is to align the interests of our leadership with those of our shareholders," Ford spokesman Jay Cooney said. "To do this, we put the vast majority of their compensation at risk through performance-based grants. Ford's stock was $1.96 a share at the time of the 2009 awards and is $12 a share today. That is more than a 500 percent increase, and this benefits all stakeholders in the Ford turnaround."
Why is Mulally worth it? Because CEOs who distinguish themselves are those who achieve profit performance and shareholder value and who demonstrate that they have the leadership qualities to make the right decisions that will safeguard the livelihoods of employees.
Ford's success is on completely solid ground. The company is making billions of dollars a year, after losing billions a year before Mulally arrived. Tens of thousands of jobs have been saved, and more are being created. Mulally steered Ford away from the need of a government-assisted bailout and bankruptcy in 2009. Shareholder value, while off the highs reached in 2010, is still well ahead of the near-ruinous lows reached in late 2008.
UAW President Bob King last year called Mulally's pay package "morally wrong." I take exception. What is morally wrong is when a company's board of directors pays a CEO tens of millions, or in some cases hundreds of millions of dollars for not succeeding. And that happens all the time. In 2009, the CEO of Chesapeake Energy, Aubrey McClendon, took home $112 million after a year in which the company's stock fell from $74 a share to $20.
I watched a parade of managers walk through the executive suite at Ford from 1999 to 2006, and you could see that none of them had what author Tom Wolfe called "The Right Stuff" in his 1979 book about NASA's astronauts in the early 1960s. I use that analogy on purpose as Mulally, smitten with aviation and space travel as a boy, longed to be part of NASA's program, but lacked some of the physical attributes it required.
Mulally has a guiding principal in his management approach that we can all learn from: Keep it simple.
Managers I've observed seem to get carried away with the complexity of running a large company in a global economy. Former GM CEO Rick Wagoner was like that. He seemed obsessed and ultimately overwhelmed by what he perceived was the complexity of GM. That led him to be a CEO more taken up with processes than results.
Mulally's secret to bringing Ford back from the brink, executives tell us, was keeping the executive team relentlessly focused on the plan he laid out. Weekly meetings (that were more often daily during the explosive days in late 2008 and early 2009 when the economy was in free-fall) bring the executive team together to share their progress on hitting goals. There are no secrets. Everyone's successes and challenges and failures are exposed to the team so that the team can fix small problems before they become big ones. That's incredibly simple, yet nothing like it existed at Ford before Mulally installed the system and the thinking.
Mulally and Chairman Bill Ford got rid of the few executives who were left who were not buying in, or wouldn't.
This may not sound like rocket science, but it is.
Having worked for several companies in my career, I can say that we could all do worse than to apply Mulally's principles to our work, and even our families:
- Information is a tool, not a weapon to use against other team members.
- Focus on the plan, and stick to it.
- Come together often to discuss and share progress on the plan. Respect the team. No BlackBerrys at the meetings.
- Don't make your point or try to achieve an edge at the expense of another team member.
- Strive to make your product or service the best in class, not merely competitive.
From what I've seen of CEOs in 25 years of covering their work, this simplicity is the new rocket science -- if only more CEOs would embrace it.
Mulally was turned down by NASA. And he even got passed over twice for the top job at Boeing Co. If a CEO's worth and success is judged on results, though, Mulally does seem to have Tom Wolfe's "Right Stuff."
Grand Blvd. is a weekly column about cars from David Kiley. For more of his writing, and everything about cars, head over to AOL Autos.
Next week, Grand Blvd. will review the new book "American Icon: Alan Mulally and the Fight To Save Ford Motor Company," by Detroit News reporter Bryce Hoffman.