Good thing GM dosen't actually have stockholders right now

[Damn True]

This:

http://www.fool.com/investing/general/2010/02/22/general-motors-latest-bizarre-move.aspx


General Motors' Latest Bizarre Move

By John Rosevear
February 22, 2010 | Comments (19) (http://www.fool.com/investing/general/2010/02/22/general-motors-latest-bizarre-move.aspx#commentsBoxAnchor)
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Chafing at the strings attached to the government bailout that saved them. Using loopholes and workarounds to pay themselves lavish salaries.


Who does General Motors think it is, Goldman Sachs (NYSE: GS (http://caps.fool.com/Ticker/GS.aspx?source=isssitthv0000001))?
OK, that's not quite fair. Leaders of the beleaguered auto giant have quite a way to go before they reach Goldman's level of unabashed self-enrichment. But there's still some reason to raise eyebrows.
In an SEC filing released after the market closed last Friday (first rule of PR: If it's bad news, drop it on Friday afternoon), GM made two announcements: first, that it has received "approval in principle" from the feds to pay new CEO Ed Whitacre (http://www.fool.com/investing/general/2010/01/25/general-motors-shocking-choice-for-ceo.aspx) a cash salary of $1.7 million a year, plus stock options and assorted other incentives for a total of around $9 million, retroactive to Jan. 1.


For reasons I'll explain in a minute, I don't think that's a big deal. But here's the announcement that gets me: GM has retained the guy it dumped, ex-GM lifer Fritz Henderson, as a 20-hours-a-month "consultant" -- for, in GM's words, "a fee of $59,090 payable monthly and reimbursement of reasonable expenses."


That's $2,954.50 an hour. To get advice from the guy the company fired.


Here's some advice that costs considerably less
If GM wants some advice, here's some it can have for free: Cut the cord with your past. Not the tail-fins-and-red-Corvettes past, but the more recent past of executive obliviousness and complacency, the one we all thought the company would cut when it dumped Henderson in December (http://www.fool.com/investing/general/2009/12/03/general-motors-finally-gets-a-clue.aspx).


Look, I get that this is intended as a relatively short-term thing. I get that GM's PR flack says that ol' Fritz has "unrivaled expertise" in "international operations," whatever that means (maybe it means operations like GM's European division Opel, which Fritz tried to dump). I get that maybe having the guy available for the occasional conference call seems reassuring to the new boss, who after all came to the job from way outside Detroit.


I even get that Henderson didn't receive severance after he was fired, and that's unusual -- CEOs ousted from companies such as Starbucks (Nasdaq: SBUX (http://caps.fool.com/Ticker/SBUX.aspx?source=isssitthv0000001)), Hewlett-Packard (NYSE: HPQ (http://caps.fool.com/Ticker/HPQ.aspx?source=isssitthv0000001)), Convergys (NYSE: CVG (http://caps.fool.com/Ticker/CVG.aspx?source=isssitthv0000001)), and Seagate (Nasdaq: STX (http://caps.fool.com/Ticker/STX.aspx?source=isssitthv0000001)) in recent years all received lovely dollar-denominated parting gifts as the doors swung shut behind them.


But.

I'm having trouble seeing three grand an hour for a guy who was CEO for only a matter of months and probably shouldn't have had the job in the first place. I'm having trouble understanding why retaining a guy who personifies the old way of doing things makes sense, given that Whitacre has been telling insiders how frustrated he is with the pace of change at GM.


Henderson didn't run GM into the weeds all by himself. He's not a villain. But as an old-guard CEO at a moment when the company desperately needed a change of course, he was the wrong guy in the wrong place at the wrong time. And he's still the wrong guy, and it's still the wrong time.


Long story short, I think retaining him right now sends a lousy message.


About that raise for Whitacre
On a different note, as I said above, I'm having trouble getting too upset about Whitacre's compensation package. While it's a bit more than the $1 a year that Ford (NYSE: F (http://caps.fool.com/Ticker/F.aspx?source=isssitthv0000001)) CEO Alan Mulally promised to get by on if his company ever had to use government loans, $1.7 million (plus some stock that may or may not be worth something someday) isn't exactly a huge payday for Whitacre. After all, the former AT&T (NYSE: T (http://caps.fool.com/Ticker/T.aspx?source=isssitthv0000001)) CEO retired with, shall we say, a comfortable sum in his bank account.


Whitacre's a big name with a huge job in front of him. Speaking as an American taxpayer, I don't think that salary is too far out of line, but maybe I'm off base. What do you think? Scroll down to leave a comment and let me know.


This is the kind of thing we believed would happen before this whole shebang went down so I guess in that respect this is in fact "Change We Can Believe In".

[Twentyover]

http://www.businessweek.com/autos/autobeat/archives/2010/02/ed_whitacres_od.html

Ed Whitacre's Odd Moves
Posted by: David Welch on February 23, 2010


Is GM Chairman and CEO Ed Whitacre crazy? Or crazy like a fox? His moves this week have raised some eyebrows. First, he names Fritz Henderson, the CEO he fired in December, as an advisor for the auto maker’s international operations. The same day, he names board member and advisor Steve Girsky to the position of vice chairman of the company.

Girsky’s promotion is the most problematic, but bringing Henderson back was the most surprising move. The former CEO was ushered out of GM by Whitacre (pictured above) and a board that wanted new blood and a change of direction. It is bizarre, to say the least, that Whitacre would can Henderson less than three months ago and bring him back to help run GM’s businesses in Asia and South America, which are vital to the company’s success.

In a way, it also makes sense. Henderson ran both businesses very successfully as he was soaring up through the ranks of GM management. The newly-promoted President of GM-International Operations, Tim Lee, is a manufacturing guy by trade. He could probably use Henderson’s knowledge of the markets in South America, China and South Korea. In fact, one source close to the situation said that Lee actually brought up the idea.

Girsky’s expanded role is also a curious decision....................

More

http://money.cnn.com/2010/02/22/autos/gm_fritz_henderson.fortune/?section=magazines_fortune

..........According to GM insiders, the Henderson deal is on the up-and-up. Nobody can quarrel with his knowledge of GM's global business. While he was still on the regular payroll, he ran Latin America and the Middle East, Asia Pacific, and Europe..........Nobody ever questioned his brains or his work ethic; it was his inability to sell Whitacre on his skills as a change agent that did him in...........


I also think it's foolish to believe that Henderson will only worrk 20 Hrs a month. for a skill set that maybe a couple dozen people on the planet posses. Is it worth it? Is it worth the risk (collapse of Asian and Latin American operations)?


Not all of GM's management was paralyzed. Henderson was fired because he wouldn't kowtow to Whiteacre on the sale of Opel. When it appeared Opel wouldn't sell at near market value, he cancelled the sale. A couple months after Fritz is fired, GM still ows Opel. So was the reason he was torched because he wasn't an intelligent manager, or because he wouldn't kiss Whiteacre's butt? Rosevear may be mad, but that ngry doesn't make him right. I saw at least 1 factual error in his story.

I have no vested interest here except accurate commentary, not opinions from some finance guy.

[MrQuick]

...and they were complaining when I was making $37 an hour. Haa

I'd bet you can find someone on this site that would do his job for $150k a year. Same expense account however.


vince

[JChilders]

This is what happens when there are no shareholders to answer to. I was one of those shareholders, but I get nothing.

[trapin]

I would not look into Fritz being brought back. He's actually not being "brought back" at all. They use the term "consultant" but I guarantee you he won't be doing any consulting here. My guess is Whitacre needs him around for information as he goes about the business of fixing this thing and Fritz (and his lawyer probably) told him...."I'll answer your questions, just as soon as you pay me" so they gave him a consultant gig to keep him happy.

When they're done with him he'll be flung away like baby poop.

[protour73]

Wait until they start selling stock again!! GM IPO coming as soon as this year, and the Government wants to fast track it so they can get their/our money back.

http://www.reuters.com/article/idUSTRE56977320090711

[formula]

150k a year?!? I'd do it as an unpaid intern as long as expenses were covered!

[holschen]

actually there are still shareholders and those are the american people
so if ur an us citizen ur still a shareholder



This is what happens when there are no shareholders to answer to. I was one of those shareholders, but I get nothing.

[wmhjr]

actually there are still shareholders and those are the american people
so if ur an us citizen ur still a shareholder

Actually, not quite. Shareholders have the ability to affect change by voting directly for specific actions. US citizens are only bankers - not shareholders. And just because we vote for congress and the administration doesn't change it. For each major change, shareholders have the right to vote or not vote, vote by proxy, etc. We have nothing. Further, because much of the administration is not even elected (czars) we don't even have influence over who makes such decisions. Or maybe I missed that annual report and proxy vote document.

[Damn True]

Actually, not quite. Shareholders have the ability to affect change by voting directly for specific actions. US citizens are only bankers - not shareholders. And just because we vote for congress and the administration doesn't change it. For each major change, shareholders have the right to vote or not vote, vote by proxy, etc. We have nothing. Further, because much of the administration is not even elected (czars) we don't even have influence over who makes such decisions. Or maybe I missed that annual report and proxy vote document.

How's the phrase go, "Taxation without............"

[Mkelcy]

Actually, not quite. Shareholders have the ability to affect change by voting directly for specific actions.

Uh, wrong. Shareholder voting rights are pretty restricted, and don't at all go to "specific actions," unless you mean election of directors, changes in the articles of incorporation, mergers, sale of substantially all of the corporation's assets, dissolution of the corporation, corporate transactions where some directors have a conflict of interest (does not include any aspect of executive compensation) and amendments to bylaws. Shareholders may make nonbinding recommendations about the governance and management of the corporation to the board of directors, but they are, obviously, non-binding.

The only time shareholders in a large publicly held corporation really have a chance to vote (as in exercise a choice) is when there is a proxy contest between two sets of greedy SOB's (entrenched management and folks who want to become entrenched management) and then you only get to select which set of greedy SOBs will be running the corporation.

[wmhjr]

Uh, wrong. Shareholder voting rights are pretty restricted, and don't at all go to "specific actions," unless you mean election of directors, changes in the articles of incorporation, mergers, sale of substantially all of the corporation's assets, dissolution of the corporation, corporate transactions where some directors have a conflict of interest (does not include any aspect of executive compensation) and amendments to bylaws. Shareholders may make nonbinding recommendations about the governance and management of the corporation to the board of directors, but they are, obviously, non-binding.

The only time shareholders in a large publicly held corporation really have a chance to vote (as in exercise a choice) is when there is a proxy contest between two sets of greedy SOB's (entrenched management and folks who want to become entrenched management) and then you only get to select which set of greedy SOBs will be running the corporation.

Mike, I have to disagree with you on this one.

Shareholders of public companies actually have the final vote for example on the sale of all or part of an entity, or potentially with mergers. Granted - unless you're a major shareholder that has limited value, but the point remains. Believe me - I am extremely familiar with shareholder rights and in particular M&A activities. That's why I'm making this distinction. With the government takeover of a publicly traded corporation (GM), the abandonment of precendent concerning bankruptcy law, and the dissolution of equity - we are nothing more than a bucket of sheep to be fleeced to provide capital for others to do what they wish - involuntarily. What's worse is that some of us were already shareholders of the previous entity. So, we lose twice. We lose our initial equity and watch it being handed to the UAW. Then, we are subsequently forced to pay for further investment with no possible means of recouping - also involuntarily.

[Mkelcy]

Mike, I have to disagree with you on this one.

Shareholders of public companies actually have the final vote for example on the sale of all or part of an entity, or potentially with mergers. Granted - unless you're a major shareholder that has limited value, but the point remains. Believe me - I am extremely familiar with shareholder rights and in particular M&A activities. That's why I'm making this distinction. With the government takeover of a publicly traded corporation (GM), the abandonment of precendent concerning bankruptcy law, and the dissolution of equity - we are nothing more than a bucket of sheep to be fleeced to provide capital for others to do what they wish - involuntarily. What's worse is that some of us were already shareholders of the previous entity. So, we lose twice. We lose our initial equity and watch it being handed to the UAW. Then, we are subsequently forced to pay for further investment with no possible means of recouping - also involuntarily.

Without getting into the politics, you seemed to suggest that if GM presently had shareholders, the things True mentioned might have been put to a shareholder vote. That's clearly not the case and in fact, except for the broad kinds of things I mentioned, shareholders can only influence a corporation by voting down one or more of the incumbent management's selected nominees for the board of directors. That power is rarely ever effectively exercised, except in very expensive proxy contests, mostly when someone is trying to consummate a hostile takeover.

[wmhjr]

Without getting into the politics, you seemed to suggest that if GM presently had shareholders, the things True mentioned might have been put to a shareholder vote. That's clearly not the case and in fact, except for the broad kinds of things I mentioned, shareholders can only influence a corporation by voting down one or more of the incumbent management's selected nominees for the board of directors. That power is rarely ever effectively exercised, except in very expensive proxy contests, mostly when someone is trying to consummate a hostile takeover.

No that is not what I'm suggesting. Let me be more clear.

Under typical shareholder situations, shareholders at least have SOME input into SOME decisions. As I specifically mentioned, one example is in an M&A situation. It is technically possible (and frankly has happened many many times) that public shareholders vote against a merger or sale. Since they "own" the company - it is their vote. One vote per share. Usually, only larger shareholders exercise their voting rights. You and I both know that Proxy documents are sent out to shareholders prior to many of those (and other) votes. You and I also know that after the BoD or BoM votes as an example to accept a tender offer in the event of potential company sale, then (assuming it's a publicly traded company) not only does the sale require SEC review and approval but also formal vote by shareholders. And that in the event that a majority of shareholders vote against acceptance of the tender offer, the deal stops until it is resolved. Either by hostile takeover by the buying corporation simply paying an even higher share price premium than the tender offer or by whatever other means to get sufficient shares for deal execution.

Under the present GM situation, US citizens have ZERO input into ANY decisions under ANY circumstances. They don't even have the smallest attempt of any decision capability. Furthermore, in the case of GM in particular, the issue is even worse. Because even the major equity shareholders prior to the government takeover were essentially stripped of their rights, and equity/ownership was assumed by the Treasury and the UAW (obviously, as well as Canada -the 2nd largest stakeholder now). So, in principal the Treasury and the Canadians (and the UAW) could in principal sell GM to somebody else regardless of what US citizens think.

I am not saying that shareholders (much less major shareholders) would would have had the opportunity to vote on what True is talking about. I am saying that they MIGHT have the opportunity to vote on future activities following the much misrepresented IPO.

In reality, there would not be much difference in the resulting activity (again, unless you're a major stakeholder). But in principle, there is a huge difference.