The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Congrats to the three heads of the Big Three automakers into making fools of themselves and further muddying the executive compensation debate. After failing to think on their feet and not adequately explain the justification for business use of corporate jets, the CEOs of General Motors, Ford and Chrysler tried to “make up” with America by driving to Washington this week to attend follow-up Congressional hearings.

Of course, the obvious lesson-learned is that public (and shareholder) perception matters. This lesson was not immediately apparent to GM’s CEO, who tried to convince the FAA into blocking public access to information about where its corporate jets flew after last week’s Congressional hearing fiasco made watching the jets’ whereabouts a daily journalistic endeavor. This is the same company that tried to curry favor with “the people” prior to last week’s hearing with a You Tube campaign. Apparently, that public relations campaign didn’t apply to the senior management team.

Anyways, this disturbing storyline raises all sorts of thought-provoking questions, including:

1. Given the road trip by the Big Three CEOs, is it safe for CEOs of other companies to now fly on corporate jets? Or will they also be tracked and hunted down by the media? This season’s perks disclosures are sure to obtain even more scrutiny than in the past.

2. Just how smart are these CEOs given that they say their companies are running out of cash this month – yet, they are willing to spend two days in the car driving back and forth to Washington?

3. Just how smart are these CEOs given that my last four cars have been Toyotas, including the two hybrids that we own now? It’s been painfully obvious to everyone that the Big Three’s business strategy has been way off-track. So how can their boards really argue that they have needed to pay these guys big bucks to “retain” them? (And of course, one has to seriously wonder about the judgment of those boards anyways for agreeing to pursue failed business strategies.)

4. Just how many of these reputation-obliterating episodes are we gonna have to witness with Bob Nardelli? You may recall that when he served as Home Depot’s CEO, he essentially refused to allow shareholders to ask questions at the company’s annual meeting (by not having the company’s directors and other senior officers attend the meeting). Shareholders were angry at that meeting because they wanted to ask the board about how they could give Bob such an outsized pay package.

It’s become quite clear to the general public that it’s not just a few rogue CEOs and boards that don’t “get it.” The public can see that many of our corporate “leaders” feel entitled to the pay packages lavished upon them, even though it’s hard to argue that they have earned it. And despite the little fact that they don’t own the companies…

Is Congress footnoted.org’s New Competition?

I thought it was worth noting this recent blog from Michelle Leder of footnoted.org:

Earlier this week, we saw various members of Congress outraged because the three top executives of GM (GM), Ford (F) and Chrysler took corporate jets to beg for $25 billion in money. What’s next, you might ask, will Congressmen (and women) actually start reading SEC filings?

Yikes! It’s already starting to happen! We nearly fell off our chairs when we saw this release from Rep. Steven LaTourette, who seems to have dived head-first into the amended Form S-4 that PNC Financial (PNC) filed yesterday in relation to its taxpayer assisted merger – Treasury is kicking in $7.7 billion – with National City (NCC). The newest thing in yesterday’s S-4 – updated from an earlier filing on Nov. 10 – was the disclosure of $49.49 million in severance payments for 14 executives at the bank. Here’s how the Congressman described it:

‘When you have 29,000 National City Bank employees in nine states worried about their jobs and retirement, how do 14 people get these perks when billions of taxpayer dollars are making this merger possible? What about the other 28,986 employees and the shareholders?’

Footnoted regulars may remember that National City has been something of a frequent flyer here, including this post from July which questioned the hefty parting gifts for outgoing CFO Jeffrey Kelly, who presumably will continue to collect his $54K a month through the end of 2010, even though his name is never mentioned in the filing. We also pointed out back in December 2006 – the stock was trading in the mid 30s then – the time-sharing agreement for use of the corporate jet. (Odd how it all comes full circle, huh?).

This filing also had some interesting tidbits on fees paid to different financial services companies including the $228 million that National City paid to Goldman Sachs (GS) over the past two years. But wait – there’s more. Just this morning, PNC filed a second amendment to the S-4, which spelled out details on the dilution of PNC stock and an additional $2.6 million for National City executives.

We can’t wait to read the Congressman’s take on that!