Ford Motor Co. President and Chief Executive Officer Alan Mulally J. Scott Applewhite/AP PhotoJ. Scott Applewhite/The Associated Press
I have never been a cheerleader for excessive executive compensation, especially when it's based on stock performance. It's too easy for management to orchestrate short-term returns that juice the share price, but do nothing for a company's long-term health.
So I read with interest this morning that Ford Motor CEO Alan Mulally earned $1.4-million in salary for 2009, but his total compensation equalled $17.9-million because of stock-based awards.
In fact, Mulally earned $1-million more in 2009 than he did in 2008. Since, joining Ford, Mulally has earned tens of millions even as the company was losing billions. (All figures in U.S. dollars.)
Mulally's latest pay awards are all about Ford's share price. Ford's stock closed at $13.29 on Friday, up from its 52-week low of $2.38. Earlier last week, Ford's stock topped $14.
But forget about Ford's stock for minute. Mulally may be one of those exceptionally rare examples of a CEO who has actually earned his pay. That is because what he's been doing since coming to Ford in 2006 should have long-term implications.
For instance, about the time Ford's shares were surging last week, J.D. Power & Associates released its latest Vehicle Dependability Study and Ford did really well. Each of Ford's U.S. brands -- Ford, Mercury and Lincoln -- finished in the top 10.
This particular study measures problems experienced by original owners of three-year-old (2007 model year) vehicles, covering 198 different problem symptoms. As a measure of quality and durability, the VDS matters.
In addition, several Ford models now consistently score above Honda Motor and Toyota Motor in widely followed rankings by Consumer Reports magazine. Overall, CR says Ford is tracking very close to the quality leaders in the auto industry.
At about the same time J.D. Power was sharing the VDS, Moody's Investors Service raised its ratings on Ford's debt, as well as the debt of Ford Motor Credit, which makes loans to dealers and customers. Moody's said that the restructured Ford is performing better than it had expected and the ratings agency is now reviewing Ford for another upgrade.
"Ford clearly has a much more robust and competitive business model that is capable of supporting significant improvement in performance over time," Bruce Clark, Moody's senior vice president, said in a statement.
It's hard to argue against Mulally's pay. As Clark puts it, Mulally has led a turnaround at Ford based on a "competitive business model that is capable of supporting significant improvement in performance over time." What's going on at Ford does not look like a short-term fix designed to juice the stock. Not at all.
It just may be that Mulally has earned every penny - and whatever Ford spends housing him in Dearborn, Mich., too. Amazing.