WASHINGTON—As soon as Delphi Corp., a global automotive parts manufacturer based in Troy, Michigan, emerges from bankruptcy this year, it will pay an estimated $216 million in executive bonuses, despite piling up losses during the past few years.
The figure was calculated by David Shepardson from documents filed with the United States Bankruptcy Court last month and stated in the article, "Bankrupt Delphi Exec Bonuses: $216MM."
Delphi, formerly owned by General Motors Corp., is one of the world's largest auto parts manufacturers. After the U.S. automotive industry downturn, Delphi filed for bankruptcy protection in 2005. On Oct. 11, 2005, the New York Stock Exchange (NYSE) delisted Dephi's stock.
Although Delphi is emerging from bankruptcy, the company announced third-quarter net losses of $1.2 billion. In addition, the state of Michigan accused Delphi of owing more than $10 million in unpaid use taxes from 1999 to 2005. The state charged that Delphi illegally claimed tax credits to offset the use tax it owes.
High Pay for Executives
To assure its survival, Delphi hopes to attract top executives through a combination of high pay, bonuses, and benefits.
"You have to beat the bid of what they [executives] would make if they went somewhere else," said Robert Daines, law professor at Stanford University, in the Shepardson article.
"Delphi must provide a target total reward opportunity sufficient to attract and retain high-caliber executives who can effectively manage Delphi's complex global businesses," said Craig Naylor, head of Delphi's compensation committee, in the same article.
Departing Chairman Robert Stevens Miller will receive $8.3 million when the company emerges from bankruptcy protection, predicted to occur sometime in March 2008.
Investor Grumbling Gets SEC to Act
The U.S. Securities and Exchange Commission (SEC) launched an online tool that allows investors to compare executive compensation for the 500 largest U.S. companies. The Web site is available at http://www.sec.gov/xbrl.
"Gone are the complicated data expeditions that forced investors to hunt through financial statements, footnotes, proxy statements, and other disclosure documents to figure out how much a company pays its top executives," said Christopher Cox, SEC chairman, in a press release.
On another note, SEC staff sent 350 letters to publicly listed companies a few months ago, discussing shortfalls regarding compliance with the new executive compensation disclosure rules. Transparency and full disclosure, as required under the regulations, were below par.
Are Executives Overpaid?
Many corporate directors and regulators find fault with executive pay. According to the 2007 National Association of Corporate directors (NACD) survey, close to 80 percent of respondents contend that compensations are not linked to performance of the company or clear and decisive performance goals. The 2007 findings closely mirrored prior year's survey findings. NACD is a not-for-profit organization formed to track corporate governance.
However, according to Dolmat Connell & Partners, a compensation consulting firm, there is no truth in executive compensations skyrocketing, as it is predominantly based on performance. The group published its study titled, "Debunking the Myth of Runaway CEO Pay: A Ten-Year Look at the Dow Jones Industrial Average, CEO Pay Levels, and Company Financial Performance."
The survey data was drawn from the past 10 years of CEO compensation information from companies on the Dow Jones Industrial Average.
"Media reports of executive pay are often sensationalized and incorrect, focusing only on increases in pay and not the story behind it," the study concluded.