Top Delphi execs awarded $500M while workers are asked to take $26->$12.50/hr pay cut
11-25-05, 12:16 AM
#1
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Top Delphi execs awarded $500M while workers are asked to take $26->$12.50/hr pay cut
The ugly just keeps getting uglier...
Good to be one of those top execs I guess.
http://www.detnews.com/apps/pbcs.dll...511230444/1148
Angry UAW fights Delphi exec bonuses
Wednesday, November 23, 2005
Bankruptcy court filing calls plan 'grossly excessive' and impeding progress on worker wage and job cuts
Bill Vlasic / The Detroit News
The United Auto Workers on Tuesday filed a scathing objection to Delphi Corp.'s proposal in U.S. Bankruptcy Court to reward its executive team with bonuses and stock potentially worth more than $500 million.
In its filing, the UAW called Delphi's executive compensation program "grossly excessive" and said it would impede the union from reaching agreement with the bankrupt auto supplier on wage and job cuts for hourly workers.
The UAW's objection, along with a similar filing by the United Steelworkers of America, set the stage for a battle on the compensation package at a Nov. 29 court hearing in New York.
At issue is whether Delphi will be allowed to pay cash bonuses and award stock to top executives while the company is in bankruptcy and when it emerges from Chapter 11.
Delphi has claimed that its "key employee executive compensation" is vital to retain executives during bankruptcy, as well as to "boost employee morale" among its top management.
But the UAW, which represents 24,000 hourly U.S. workers at Delphi, blasted the program in light of Delphi Chairman Robert S. "Steve" Miller's demands for massive layoffs and huge pay and benefit cuts for union members.
"The (key employee compensation plan) destroys any notion that Delphi's bankruptcy will require shared sacrifice," the UAW said. "Designed to handsomely reward a select few with oversize payments, the KECP is decidedly the wrong message to send to Delphi's workers."
UAW President Ron Gettelfinger last week attacked the compensation package as "obscene" given that Delphi is asking its rank-and-file workers to accept pay cuts from $26 an hour to $12.50.
Miller said in an interview Monday that the union is "trying to distract attention" from Delphi's high labor costs by criticizing the executive pay proposal.
"The executive compensation program is necessary to retain the focus of this executive group," Miller told The Detroit News. "Ultimately, the judge will have to rule as to how necessary."
The program has three components -- bonuses, severances and stock awards.
Delphi's "incentive bonus" plan would parcel out $21.5 million to an unspecified number of executives during the first six months of bankruptcy. An additional $88 million in cash is also set aside for "emergence" bonuses to 500 execs when Delphi comes out of Chapter 11.
The severance program would give the top 21 officers a total of 18 months' worth of salary and target bonuses if they are forced to leave the company. Another 89 execs would get a year's pay and bonus as severance, while 373 other managers would receive a year's pay.
But the most lucrative part of the program is in the stock awards that about 600 members of senior management would receive if Delphi undergoes a successful reorganization.
According to the program, the management team would receive 10 percent of the equity in a reorganized Delphi. With a projected net equity of $4 billion, the stock options and restricted stock could total $400 million.
Under a successful reorganization, Delphi's top five officers -- not including Miller -- could receive a combined $25 million in stock options and another $12.5 million in restricted stock
The unions and other critics have seized on Delphi's argument that its executive compensation has been "substantially less than market" in recent years. Given that Delphi was losing money and spiraling into bankruptcy, experts say its leadership team's performance didn't warrant pay equity with executives from healthy companies that are better rewarding shareholders.
Delphi also has cited high turnover as a rationale for providing a more competitive executive compensation plan. Some Delphi executives, however, have left in the wake of an federal investigation into accounting practices at the company.
The steelworkers union, which represents about 1,000 Delphi workers, said the compensation program "simply shocks the conscience" with its largesse for senior management.
"Placed in context, the KECP is the overreaching product of corporate hubris," the union said in its filing. "At a time when it asks its workers and retirees to make unfathomable sacrifices, the denizens of Delphi's corporate suite seek to line the pockets of a small number of top executives."
The unions charged that the incentive bonus program has no specific benchmarks for performance and is based on Delphi's earnings before interest, taxes and restructuring costs.
"The measure excludes restructuring charges, thus eliminating an incentive to rein in costly cash expenses in a category susceptible to manipulation," the UAW filing said.
In his interview with The News, Miller vigorously defended all aspects of the compensation program as vital to keeping his executive team intact in the aftermath of Delphi's Oct. 8 bankruptcy filing. "I cannot afford to lose this group of executives," he said. "They need to be appropriately incentivized to stay."
He went on to state that executive pay levels are not the reason Delphi went bankrupt.
"The problem is that I am paying hourly workers triple what our competitors pay," Miller said.
"I am paying the executive group less than what other companies pay."
Miller, a former Chrysler Corp. finance executive, received a $3 million signing bonus when he joined Delphi in July. He also was given a $1.5 million annual salary, but has said he will take a symbolic $1 as his pay in 2006.
And while he is not included in the bonus and stock programs, Miller's future compensation is addressed in the employee compensation program.
According to the plan, the compensation committee of Delphi's board "reserves the right to compensate Mr. Miller as it deems appropriate at the end of his period of service as CEO."
In their filings, the UAW and steelworkers asked Judge Robert Drain to deny the plan in the interest of a successful Delphi reorganization.
"It is unlikely that the UAW will be able to garner the necessary support among its membership for a negotiated agreement if the employees view the process as tainted by large awards for a select few while they bear the brunt of cost-cutting," the UAW said.
Good to be one of those top execs I guess.
http://www.detnews.com/apps/pbcs.dll...511230444/1148
Angry UAW fights Delphi exec bonuses
Wednesday, November 23, 2005
Bankruptcy court filing calls plan 'grossly excessive' and impeding progress on worker wage and job cuts
Bill Vlasic / The Detroit News
The United Auto Workers on Tuesday filed a scathing objection to Delphi Corp.'s proposal in U.S. Bankruptcy Court to reward its executive team with bonuses and stock potentially worth more than $500 million.
In its filing, the UAW called Delphi's executive compensation program "grossly excessive" and said it would impede the union from reaching agreement with the bankrupt auto supplier on wage and job cuts for hourly workers.
The UAW's objection, along with a similar filing by the United Steelworkers of America, set the stage for a battle on the compensation package at a Nov. 29 court hearing in New York.
At issue is whether Delphi will be allowed to pay cash bonuses and award stock to top executives while the company is in bankruptcy and when it emerges from Chapter 11.
Delphi has claimed that its "key employee executive compensation" is vital to retain executives during bankruptcy, as well as to "boost employee morale" among its top management.
But the UAW, which represents 24,000 hourly U.S. workers at Delphi, blasted the program in light of Delphi Chairman Robert S. "Steve" Miller's demands for massive layoffs and huge pay and benefit cuts for union members.
"The (key employee compensation plan) destroys any notion that Delphi's bankruptcy will require shared sacrifice," the UAW said. "Designed to handsomely reward a select few with oversize payments, the KECP is decidedly the wrong message to send to Delphi's workers."
UAW President Ron Gettelfinger last week attacked the compensation package as "obscene" given that Delphi is asking its rank-and-file workers to accept pay cuts from $26 an hour to $12.50.
Miller said in an interview Monday that the union is "trying to distract attention" from Delphi's high labor costs by criticizing the executive pay proposal.
"The executive compensation program is necessary to retain the focus of this executive group," Miller told The Detroit News. "Ultimately, the judge will have to rule as to how necessary."
The program has three components -- bonuses, severances and stock awards.
Delphi's "incentive bonus" plan would parcel out $21.5 million to an unspecified number of executives during the first six months of bankruptcy. An additional $88 million in cash is also set aside for "emergence" bonuses to 500 execs when Delphi comes out of Chapter 11.
The severance program would give the top 21 officers a total of 18 months' worth of salary and target bonuses if they are forced to leave the company. Another 89 execs would get a year's pay and bonus as severance, while 373 other managers would receive a year's pay.
But the most lucrative part of the program is in the stock awards that about 600 members of senior management would receive if Delphi undergoes a successful reorganization.
According to the program, the management team would receive 10 percent of the equity in a reorganized Delphi. With a projected net equity of $4 billion, the stock options and restricted stock could total $400 million.
Under a successful reorganization, Delphi's top five officers -- not including Miller -- could receive a combined $25 million in stock options and another $12.5 million in restricted stock
The unions and other critics have seized on Delphi's argument that its executive compensation has been "substantially less than market" in recent years. Given that Delphi was losing money and spiraling into bankruptcy, experts say its leadership team's performance didn't warrant pay equity with executives from healthy companies that are better rewarding shareholders.
Delphi also has cited high turnover as a rationale for providing a more competitive executive compensation plan. Some Delphi executives, however, have left in the wake of an federal investigation into accounting practices at the company.
The steelworkers union, which represents about 1,000 Delphi workers, said the compensation program "simply shocks the conscience" with its largesse for senior management.
"Placed in context, the KECP is the overreaching product of corporate hubris," the union said in its filing. "At a time when it asks its workers and retirees to make unfathomable sacrifices, the denizens of Delphi's corporate suite seek to line the pockets of a small number of top executives."
The unions charged that the incentive bonus program has no specific benchmarks for performance and is based on Delphi's earnings before interest, taxes and restructuring costs.
"The measure excludes restructuring charges, thus eliminating an incentive to rein in costly cash expenses in a category susceptible to manipulation," the UAW filing said.
In his interview with The News, Miller vigorously defended all aspects of the compensation program as vital to keeping his executive team intact in the aftermath of Delphi's Oct. 8 bankruptcy filing. "I cannot afford to lose this group of executives," he said. "They need to be appropriately incentivized to stay."
He went on to state that executive pay levels are not the reason Delphi went bankrupt.
"The problem is that I am paying hourly workers triple what our competitors pay," Miller said.
"I am paying the executive group less than what other companies pay."
Miller, a former Chrysler Corp. finance executive, received a $3 million signing bonus when he joined Delphi in July. He also was given a $1.5 million annual salary, but has said he will take a symbolic $1 as his pay in 2006.
And while he is not included in the bonus and stock programs, Miller's future compensation is addressed in the employee compensation program.
According to the plan, the compensation committee of Delphi's board "reserves the right to compensate Mr. Miller as it deems appropriate at the end of his period of service as CEO."
In their filings, the UAW and steelworkers asked Judge Robert Drain to deny the plan in the interest of a successful Delphi reorganization.
"It is unlikely that the UAW will be able to garner the necessary support among its membership for a negotiated agreement if the employees view the process as tainted by large awards for a select few while they bear the brunt of cost-cutting," the UAW said.
11-25-05, 03:58 AM
#2
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This is a situation where somebody within the company at the executive level, with a concience, needs to go play golf w/ the chair and dump him in the drink.
I mean, convince him that such a move doesn't make any sense at a time like this.
The chair ought to be ousted, he sounds like a *****.
M.
I mean, convince him that such a move doesn't make any sense at a time like this.
The chair ought to be ousted, he sounds like a *****.
M.
11-25-05, 04:35 AM
#3
Lexus Fanatic
Originally Posted by XeroK00L
Delphi has claimed that its "key employee executive compensation" is vital to retain executives during bankruptcy, as well as to "boost employee morale" among its top management.
"Miller said in an interview Monday that the union is "trying to distract attention" from Delphi's high labor costs by criticizing the executive pay proposal.
"The executive compensation program is necessary to retain the focus of this executive group," Miller told The Detroit News. "Ultimately, the judge will have to rule as to how necessary."
He went on to state that executive pay levels are not the reason Delphi went bankrupt.
"The problem is that I am paying hourly workers triple what our competitors pay," Miller said.
"I am paying the executive group less than what other companies pay."
"Miller said in an interview Monday that the union is "trying to distract attention" from Delphi's high labor costs by criticizing the executive pay proposal.
"The executive compensation program is necessary to retain the focus of this executive group," Miller told The Detroit News. "Ultimately, the judge will have to rule as to how necessary."
He went on to state that executive pay levels are not the reason Delphi went bankrupt.
"The problem is that I am paying hourly workers triple what our competitors pay," Miller said.
"I am paying the executive group less than what other companies pay."
11-25-05, 02:06 PM
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This situation is very common for companies in bankruptcy protection. The executives always use the excuse that "in order to retain key talent" to lead the company through the reorganization, they need big salaries and bonuses. Strangely enough, the courts usually seem to agree with this reasoning.
But it only seems to happen in situations like this, where it's exactly this sort of behavior that has led the company to bankrputcy in the first place. The executives HAVE to realize how this looks to the rank-and-file, and they simply don't care. That indifference, and resulting animosity, inevitably leads to a situation where every employee feels they have to be out for themselves. After all, it's clear that's what the leadership thinks!
But it only seems to happen in situations like this, where it's exactly this sort of behavior that has led the company to bankrputcy in the first place. The executives HAVE to realize how this looks to the rank-and-file, and they simply don't care. That indifference, and resulting animosity, inevitably leads to a situation where every employee feels they have to be out for themselves. After all, it's clear that's what the leadership thinks!
11-25-05, 03:32 PM
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Not saying this the exact case here but the reason CEO's make a lot more is an example of the economic "tournament theory."
Another place where relative ability may matter a great deal is in the managerial ranks of corporations. There are only limited numbers of promotions available, and they are usually determined by relative performance. Only one person can be CEO of a company at a time, and small differences in ability among those contending for the top spot can result in large differences in rewards. Further, it may be in the interests of the company to structure pay so that the winner makes very large sums as a way of spurring on those lower in the hierarchy. The primary reason for the high pay given to the CEO may be to give those lower in the hierarchy an incentive to work hard, not to give the CEO himself the incentive to perform well.
Source
http://ingrimayne.saintjoe.edu/econ/...ournament.html
Another place where relative ability may matter a great deal is in the managerial ranks of corporations. There are only limited numbers of promotions available, and they are usually determined by relative performance. Only one person can be CEO of a company at a time, and small differences in ability among those contending for the top spot can result in large differences in rewards. Further, it may be in the interests of the company to structure pay so that the winner makes very large sums as a way of spurring on those lower in the hierarchy. The primary reason for the high pay given to the CEO may be to give those lower in the hierarchy an incentive to work hard, not to give the CEO himself the incentive to perform well.
Source
http://ingrimayne.saintjoe.edu/econ/...ournament.html
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