Modern Management Science

CEOs these days aren’t just slashing worker jobs to add on to their own rewards.

They’re slashing worker pay as well.

The founder of modern management science, Peter Drucker, considered excessive executive pay an assault on good enterprise management practice. 

Drucker, the analyst who founded modern management science, died in 2005 at age 95.

At his death, business leaders worldwide hailed this Austrian-born American for his enormous contribution to enterprise efficiency. 

But Drucker also cared deeply about enterprise morality.

In his later years, he watched—and despaired—as downsizing became an accepted corporate game plan for pumping up executive paychecks.

He could find “no justification” for letting CEOs benefit financially from worker layoffs.

Yeah, neither could we.

“This is morally and socially unforgivable,” he would write.

Get used to it, America! It's a new age.. Age of the glutton!

If Drucker were writing today, he’d likely be even more unforgiving.

CEOs these days aren’t just slashing worker jobs to add on to their own rewards, they’re slashing worker pay as well—and no CEO may be benefiting more from shrinking paychecks than Ford chief executive Alan Mulally.

Mulally has restored Ford to profitability,

Anybody could have done that...just reduce the workforce by 100% and start raking in the cash!

his many business and political admirers never tire of pointing out, without having to take any taxpayer bailout.

Waddaguy!

But Mulally has indeed enjoyed a hefty bailout—at the expense of his workers!

Ain’t that always the way?

Entry-level workers at Ford used to make $28 an hour. 

That's outrageous!

Wadda they think...they’re in the United States?

That rate fell by half when the auto industry financial crunch first hit five years ago.

Has it been that long?

Doesn’t time fly when you’re having a good time?

Yes, we remember it well...the beginning of the end of America as we knew it.

and now sits a bit above $19. And since the crunch all Ford workers, not just entry-level workers,  have given up cost-of-living wage adjustments and health benefits.

Let’s hope the cost-of-living stagnates and everybody is feeling super healthy, otherwise...they’re totally screwed! 

Auto industry execs have declared these worker concessions as absolutely necessary.

Yeah, necessary.

Without lower compensation for auto workers, the argument goes, the auto industry would never become “globally competitive.”

And, we must be globally competitive...another way of saying...eat dirt, American workers...we’ve got you by the short curlies!

This same reasoning apparently doesn’t apply to compensation for Ford CEO Mulally.

You bet your bippy!

Ford has just announced that Mulally’s pay package for 2012 nearly hit $21 million.

Hello, Mrs. Mulally...Wanna go shopping?

That’s like dollars? Not rupees? Or shekels? Or wampum?

His personal rewards for the year almost doubled the pay that went last year to his chief German rival, Daimler CEO Dieter Zetsche,

Hey, Zetsche! Lessee ya match this!

and even more stunningly dwarfed the $1.48 million Toyota CEO Akio Toyota took home.

Who today sits in his counting house counting out his money.

But the magnitude of how well Mulally has done for himself—since Ford workers started coughing up concessions—only swings into real focus when we step back and contemplate the towering pile of Ford shares of stock he now holds.

Mulally has done very, very well for himself. 

In just over a half-dozen years, CNN Money reports, Mulally “has amassed holdings valued at more than $300 million.”

Among America’s CEOs, of course, Mulally hardly stands alone.

Hardly.

The outrageousness of American CEO rewards has been building for some time.

It soitainly has exploded...hasn’t it?

Back in 1986, as Forbes noted last week, America’s ten highest-paid CEOs together pocketed $57.88 million in compensation.

Together?

In 2012, the top 10 pulled in $616.4 million, about five times as much as the 1986 total after taking inflation into account.

Over that same 26-year span, average weekly wages for America’s workers barely increased at all.

So what should we be doing about CEO compensation?

Drucker suggests a more reasonable approach. Refer to his guidelines for a fool-proof answer to the financial jig saw.

In France, the newly elected government of President François Hollande has placed a 450,000 euro cap—about $580,000—on executive pay at the 52 companies where the French government holds a majority stake.

This cap will essentially limit executives at these publicly controlled companies to no more than 20 times the pay of their lowest-paid workers.

The French people, for their part, would like to see their government apply a similar cap to executives at all corporations, not just those companies where the government holds a controlling interest.