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Benjamin W. Heineman, Jr.
Legal Scholar

Benjamin W. Heineman, Jr.

Business ethics expert; senior fellow at Harvard’s schools of law and government; former General Counsel for General Electric; former assistant secretary for policy at the U.S. Department of Health, Education and Welfare (now Health and Human Services.)

Pay for Performance

One important step -- substantively and politically -- would have been to emphasize in detail how the compensation of the top leaders at each company would be tied to specific milestones on the purported road to recovery.

For the CEOs to say that they will work for a dollar a year if Congress forks over the cash ignores the vital importance of providing compensation carrots (and sticks) for the key executives who, as a team, will have to defy auto history and transform the industry, which these executives had a hand in creating.

Nothing concentrates the mind like a financial hanging. Reduced total compensation for 2009 and 2010 should be set out explicitly and divided into discrete pieces, with each increment tied to a particular goal (dealers cut, factories closed, specific technology steps reached, brands reduced, etc.) For each goal missed, that increment of pay is either withheld or reduced.

This step would have had several benefits. It would have directly addressed one of Congress' biggest questions: Are the auto executives really going to meet their commitments? It would also have addressed Congress' concern for all stakeholders share the "haircuts," which are inevitable for industry survival. And, in particular, it would have demonstrated that executives were going to make sacrifices like members of United Auto Workers union.

Finally, it would have created a uniform set of pay-for-performance goals so the executives had powerful incentives to work together across functions in a cooperative effort which will be so necessary to change not just the metrics but also the culture of the auto industry.


By Benjamin W. Heineman, Jr.

 |  December 8, 2008; 2:56 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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The 'share the wealth' environment is admitably a poor incentive for corporate officers and firing them and bringing in novices who will work without financial incentives of bonuses would be a challenge for any competent headhunter to find -- I know, I use to be a 'headhunter' for the largest executive search firm in the world in two different east coast cities.

Nevertheless, firing those who are perceived as responsible, FEELS GOOD, even if it makes questionable sense. One often learns more from failure than from success, though the later surely pays better. LOL

THAT SAID, WHY I'D LOVE TO BE THE NEW CAR CZAR, OR EVEN THE USED CAR CZAR.

I FIND THAT LAWYERS MAKE EXCELLENT CAR CZARS AND I HAVE BOTH DOMESTIC & FOREIGN CAR EXPERIENCE, NAMELY, FORD AND GM ON THE DOMESTIC SIDE AND HONDA AND TOYOTA ON THE FOREIGN SIDE

AND I KNOW CHINESE

为什么I' 是D的爱新的汽车沙皇,甚至半新车沙皇。 我发现律师做优秀汽车沙皇和我有两国内& 外国汽车经验,即,在外国边的国内边的福特和GM和本田和丰田

AND JAPANESE TOO.

I'なぜ; Dは新しい車の皇帝、また更に中古車の皇帝であることを愛する。 私は弁護士が優秀な車の皇帝を作る私持っている両方国内&をことが分り、; 外国の側面の国内側面の外国車の経験、即ち、フォードおよびGMおよびホンダおよびトヨタ

Posted by: brucerealtor@gmail.com | December 10, 2008 4:12 AM
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The problem is Ben the executives have been working for nothing for years. Money, bonuses, and status are nothing compared with building the greatest car the world has ever seen, nothing beats pride of workmanship - knowing you're the best and you are getting better at it every day - that's working for something - that's a legacy - that's the american dream - to be the best, second to none.

Posted by: Jack | December 9, 2008 11:00 AM
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