When Jerome York—whose boss, billionaire Kirk Kerkorian, owns 7.8% of General Motors—made his heavily-anticipated speech on Jan. 10 suggesting how GM could turn things around, he made a few unpopular suggestions. Among them: GM’s top five execs should take a pay cut. They collectively make $7 million. Cutting pay would send a signal to the union that everyone must pitch in to save GM, and that management isn’t too elitist to share the pain.
The idea isn’t going over well. Vice Chairman and CFO Frederick A. “Fritz” Henderson said GM execs have already lost their bonuses, which amounts to a pay cut since a big part of compensation comes from performance incentives. In Henderson’s eyes, GM has already made good on York’s recommendation. GM Vice Chairman Robert A. Lutz told the Detroit News that he isn’t keen on the idea, either. His bonus has disappeared, cutting a big part of GM executive compensation. He says executive salaries are like professional athletes’ salaries. You must pay up for talent.
York’s response? He says rank-and-file factory hands don’t have a lot of sympathy for cuts in bonuses. GM must cut executive salaries to get the union workers and leaders to feel and “equity of sacrifice.” It looks like this will be akin to asking Congress to vote to cut their pay. When it comes to York’s prescription for GM, “there are definitely some disagreements,” says one GM exec. We may be headed for a standoff.