Ford Motor Co.'s new President and CEO Alan Mulally earned $28.2 million during his first four months on the job, the automaker reported Thursday.
That was Mulally's total 2006 compensation, according to the proxy statement Ford filed with the Securities and Exchange Commission. The former aviation executive started Sept. 1 as CEO of the automaker, which lost $12.7 billion in 2006.
"The pay plan is very aggressive," said Dan Moynihan, an executive pay expert with Compensation Resources Inc. in New Jersey. "Is it egregious? Probably not. Is it big? Yes."
Mulally's pay included $666,667 in base salary, a $7.5 million hiring bonus and another $11 million to offset stock options and other compensation he forfeited when he left his previous employer, Boeing Co.
He also received $920,404 in Ford stock and $7.8 million worth of stock options.
Another $334,433 in "other" compensation includes items such as life insurance premiums toward a policy worth 1 1/2 times the CEO's annual salary, tax reimbursements and company contributions to his 401(k) plan. Mulally's personal use of Ford aircraft, including for his wife, family and guests, was worth $172,974, and Ford spent $55,469 for his relocation and temporary housing costs. The company also reimbursed him $21,878 to pay Mulally's personal taxes on such items.
Mulally was the highest-paid Ford executive last year.
Ford's compensation committee, made up of three outside board members, noted in the proxy statement: "We understood that significant compensation was needed to entice Mr. Mulally, a career Boeing executive, to leave the security of his former employer in order to work for a company in the midst of a turnaround plan."
Executive Chairman Bill Ford Jr., great-grandson of auto titan Henry Ford, received no compensation for 2006. He volunteered in May 2005 to forgo any pay until the company turns a profit. The proxy reflects the expense to Ford Motor related to $10 million in stock and stock options previously awarded to the chairman.
Millions went to other execs
Other Ford senior managers' 2006 pay was disclosed Thursday in the annual filing:
More than $500,000 of that was for Fields' use of company airplanes to commute to his Florida home; after some controversy he ended the practice earlier this year and instead Ford will pay for his first-class seats on commercial flights.
Padilla's perks, which also are available to other senior executives, ranged from use of corporate aircraft, car and driver service, use of company cell phones, phone cards, cars, sporting event tickets and club memberships. They were valued at $147,581 for 2006, Ford said. Padilla stopped using the aircraft as of his July 1 retirement.
Serving the shareholders
The potential value of some of Mulally's stock options is tied to Ford's performance on Wall Street. The automaker's shares closed today at $8.01; down from a 52-week high of $9.48.
The CEO can cash in 250,000 shares when Ford's common stock price stays above $15 for 30 consecutive days; the same amount of shares is tied to target prices of $20, $25 and $30.
Ford's shares haven't touched the $15 mark since August 2004. The stock's 10-year high is $37.70, set on April 19, 1999.
Another 3 million of Mulally's shares vests over three years, as do 600,000 restricted shares, but they are not tied to stock price or other performance measures.
The company said in the proxy, which is distributed to investors, that it "believed these awards align Mr. Mulally's interests with your interests as shareholders and provide appropriate incentives to work toward achieving stock price appreciation."
Compensation expert Moynihan said the overall structure of Mulally's package should have been tied more closely to results rather than the CEO's tenure with the automaker.
"He got $20 million just to walk in the door," Moynihan said. "He has 3 million options that are time based. Assuming he stays around for three years, he has all those options.
"Then they put 1 million options tied to stock performance. If it were me, I would have flip-flopped the two option plans and tied the 3 million options to shareholder return. At the end of the day, he already got $18.5 million just by showing up. How much more do you need to reward him for his time?"
Mulally earned a base salary of $825,000 in 2005, his last full year at Boeing, according to the company's proxy statement. Including long-term incentive payouts, stock awards and other elements, his total compensation was nearly $10 million.
Mulally gets nothing if he quits the automaker without "good reason." If he's fired or if there is a change in control at Ford, he'll get a severance package worth $27.5 million, including salary, cash bonus and accelerated stock and options.
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