In the past three and a half years, General Motors (GM) has lost more than $67 billion. In the past eight years, the company's market cap has dropped by $37 billion. Add the two numbers together, and GM's shareholders have lost more than $100 billion so far this decade.
GM's CEO Rick Wagoner has presided over all of this value destruction. This is also the only period he has presided over. Before taking the reins as CEO in 2000, Wagoner ran GM's North American division, which did fine when gas was $1.50 a gallon but is now losing more more than $3 billion a quarter thanks to an over-dependency on trucks and SUVs.
Other highlights of Wagoner's 8-year reign, courtesy of George Anders at the WSJ:
* GM stock down 83%
* 50% dividend cut
* Global unit market share down to 12.5% from 25% (vs. Wagoner's pledge to take it to 28%)
* Looming liquidity crisis
And yet, despite all this, GM's board remains in love with the man. Joe Nocera in the NYT:
"Rick has the unified support of the entire board to a person," the company's lead outside director, George M.C. Fisher, told Bill Vlasic of The Times in an interview Wednesday morning. "We are absolutely convinced we have the right team under Rick Wagoner's leadership to get us through these difficult times and to a brighter future."
George Fisher? Who is George Fisher again? Oh, yes, the GM director who has publicly admitted that he doesn't give a damn about the stock price.
George Fisher is also the former CEO of Eastman Kodak -- responsible for the company for four dismal years in which it began to get demolished by the transition to digital photography. Perhaps this explains why Fisher and the rest of GM board remain so steadfast in their support of Wagoner: It's not his fault that the company never diversified its US product line away from gas guzzlers, lost market share, lost most of its market value, and lost more money in three years than just about any company in history. It was an act of God!
The NYT's Nocera thinks Fisher's empathy for Wagoner is the main reason the board is supporting him. And he makes a persuasive case:
So what gives? From what I hear, Wagoner is a very nice man, so that helps. And it is, without question, a difficult environment. But I'm thinking something else is at work too: CEO empathy. Fisher, you see, was once the head of Kodak, a company that, under his tenure, failed to adapt quickly enough to the digital world -- and lost its leadership in cameras and film as a result. When he departed in 1999, after four years on the job, his tenure was widely viewed as a failure, something Kodak's subsequent dismal performance has only confirmed. When Wagoner gives his latest excuse for the company's latest loss to the board, Fisher feels his pain. Which is also why Wagoner will be allowed to continue his record-setting performance, at least for the foreseeable future.
If GM's stock price falls much farther, the company might make an attractive buyout candidate. It would be interesting to see whether, say, Steve Schwarzman's Blackstone would be as enamored of Wagoner's performance as George Fisher is.
See Also:
British Businesswoman Shoved Onto Train Tracks After Asking Men To Stop Smoking
GM Director Admits He Doesn't Care About Stock Price
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What I'll do. Get into cahoots with the electric companies, maybe buy a few companies that make and put up windmills. Lobby the govt with the electric companies, to get ALL cars and trucks, to run on the new, 400 mile battery that GM probably has the plans for now. Market the cars and trucks it goes into, and price them at no more than $30,000 for a well equipped ride. Make them out of as many US made parts as possible. Realize the UAW is not around to grind automakers into the dust.
Why did they crush the EV1s? When they Prius took off, why didn't they put the EV1 back into production and start work on the EV2? They'd have an EV3 by now and be selling rings around Toyota. Instead we have the promise of the (re)Volt(ing) that gets more and more expensive as it's release date gets pushed farther and farther back.
NO BAILOUT ON TAXPAYER MONEY! These guys have made one bad decision after another and bankrupted their company with obscene salary bonuses and perks while laying off workers and losing billions. No corporate welfare. Sink or swim. *That's* free market capitalism.
In the past three and a half years, GM has lost more than $67 billion. CEO Rick Wagoner has presided over all of this value destruction."
The reason is fairly simple. In the past the Board of Directors and the Chairman of the board had two functions. These were oversight of the corporation and long term planning, These were people who cared about the fiscal future of the company and it's physical future. In the present board of directors they care more for their perks, supporting the man that got them the place on the board and how many other companies they have have seats on their board as well. They have become professional members of board of directors. It has become a mutual masturbation society. It is all about them and noting about the company or it employees. Their motto is "what's in it for ME!"
The Saturn Astra is probably the best car GM has designed in over a decade. Unfortately its been out in Europe for 4 years now and is outdated.
Ironically a suprise hit for GM has been the Chevy Aveo, which is made in South Korea.
Who knows maybe Wagoner's long term stragety is to bankrupt the company so they can lay off more workers and welch on their pension requirements. He doesn't care anyway. A signifigant amount of that 30 billion that GM is quickly going through is already set aside for the board's and Wagoner's severance pay.
So, please, perhaps you can answer the larger question - why do boards support CEOs who preside over failed strategies ultimately costing the companies (and sometimes the taxpayers) millions of dollars? What is your theory?
This is Capitalism. CEO's exist only to rake for personal profit and lavishing benefits on their boards. Free loading off the backs of the workers, shareholders and government welfare is kosher.
Business has no social obligation to serve the public through high quality products and services nor to the shareholders who have invested and are the true owners of any corporation nor to workers in the USA who have built the company , nor to environmentally responsible practices nor to the U.S. government to pay their fair share in taxes.
Rick Wagoneer is no exception to the rule. He follows Lee Raymond, Bill Gates, Ken Lay, Michael Milken, Dennis Kozlowski, and Dr. William McGuire. All capitulated to the diminished ethical directive of the Milton Friedman and taken it to its next logical level.
Friedman wrote: "The Social Responsibility of Business is to increase its profits".
Since CEOs alone are hailed for making profit, they alone should be the beneficiary all profits. All who worked hard, invested, added their creative influence, and helped create an environment conducive to profiteering should go unrecognized and uncompensated.
Fortunately, Ralph Nader has been the courageous fighter for investor and consumer rights. He'll be discussing his plan to empty the prisons of nonviolent drug offenders and fill them up with corporate criminals today on C-Span. Ralph believes that corporations must never become our masters but always remain our servants if our nation and people are to prosper.
Meanwhile American CEOs earn 250 times as much as the average worker in the company by what stretch of the imagination are they worth even a fraction of that? It is scandalous. If this weren't all an inside con job, where one hand scratches the other, American CEO jobs could be outsourced, because in any other develped country CEOs earn a lot lot less than their American counterparts.
It is so tiring to hear about what amounts to theft of corporate assets and exploitation of workers and finally the downfall of the American economy.
Fiduciary duty just ain't enough these boards need to be regulated.
When I think of GM, I think of all the car models that have come and gone due to poor quality. Remember the Corvair, Vega, Allante, that mid-engine Pontiac that I can't even remember the name of and so on. They would bring out a new model with a crappy engine and it would take a couple of years before they got it right but by then the car had a bad reputation. Chevy has a new Malibu but I can't tell you what other models they make any more, they've screwed around so much. They could have built SUVs and trucks AND also built quality economy cars too but they didn't.
No one seems to be demanding answers to the hard questions.
I am sick to my stomach when I read about these high flying execs who can't even describe the products they are selling, but have a problem finding enough pockets for the money they are taking for their failed efforts. Can we truthfully say that the most successful companies have the best and therefore the highest paid execs? In my book if you are losing profit, you are also losing salary and bonus. I suspect that the most succesful companies do NOT have the highest paid execs...
Their performance shoud be the criteria for compensation. There should also be ceilings where these "stars'" compensaton doesn't run away from the average workers percentage wise..
Welcome to the new America.
The CEO Wagoner is amazingly well rewarded for his poor performance. The board likes it when the CEO gets more money in one month than the Toyota CEO gets in a year. That trickles down and the board is rewarded for their allegence to the CEO ... They also get much more money than their Toyota counterparts.
Remember, when it is time to garrot the stockholders, the executives will get their golden parachutes along with the CEO.