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The Idea That GM's New CEO Is Underpaid Is Bogus

Feb 5, 2014, 20:37 IST

REUTERS/Rebecca Cook

General Motors says that criticism from Fox News and Think Progress of new CEO Mary Barra's compensation is "premature and flawed."

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The automaker is completely right.

Barra will make $1.6 million in salary and $2.8 million under a short-term incentive plan, GM announced in an SEC filing in January.

Outgoing CEO Dan Akerson made about $9 million in 2013, prompting Elizabeth McDonald at Fox to ask, "why does GM think Barra's value as its CEO is currently worth 52% less than Akerson's?"

Think Progress piled on, writing, "while [Barra] may have shattered that glass ceiling, her pay is another story."

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Their arguments were sparked when the White House invited Barra to join Michelle Obama at the State of the Union. In his address, the President both praised GM for choosing its first female CEO, and criticized unequal pay for women.

But the automaker is right to defend itself. Criticizing Barra's pay is premature, because her full compensation hasn't been announced yet. As GM said in its recent statement (and mentioned in the original filing), the salary and short-term incentives are only two of three ways Barra gets paid:

Specific long-term incentive compensation numbers will be included in the company's April 2014 proxy filing, which likely will dispel any notion of pay inequity. Stockholders at GM's Annual Meeting must approve the long-term portion of her pay.

As the Associated Press noted back in January:

[Barra's] pay would climb further if GM shareholders approve a new long-term incentive plan at their next annual meeting. Stock and option awards make up the bulk of CEO pay at GM and many other publicly traded companies.

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So we don't know how much Barra will actually be paid, and it's likely the final number will be up there with what Akerson got. GM rep Greg Martin told Business Insider the full compensation will "dispel any notion of pay inequity."

In their attacks, Fox and Think Progress also pointed out that Akerson had no experience in the auto industry before taking the helm at GM, while Barra has been with the automaker for decades. So she deserves more, right?

Not really. Unlike Barra, Akerson had worked as CEO before, at Nextel and XO Communications. And he wasn't brought into run a regular automaker. He was chosen by the U.S. Treasury to guide GM through a wrenching bankruptcy, and put its finances in order. By most accounts, he did a fine job.

Now that the ship has been righted, Barra, who comes from the product side of the business, is charged with running a company that will succeed in the long run. We'll know how much GM thinks that's worth come April, when Barra's long-term incentive compensation will be announced, pending stockholder approval.

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