Rarely in this blog will you see me directly criticize an individual’s compensation arrangements but this example epitomizes why shareholders are angry about the state of CEO compensation today. It is these types of incidents that lead to generalizations about executive pay and the resulting activism, legislation, and misguided reactions. We cannot conclude that all CEO pay is wrong, or that most CEO pay is wrong, but I can conclude that Ralph Hake’s compensation arrangement, in light of his destruction of Maytag and its treatment of its customers, is unacceptable. The members of the Compensation Committee of the Board of Directors should be held accountable for this. Here's why.
The CEO joins the company in June 2001, proceeds to destroy two-thirds of the company’s market value over the next 4 years costing the shareholders $1.6 billion. In return, he gets compensation of $9.4 million by having the company taken over by Whirlpool Corp. This describes the situation with Maytag's CEO Ralph Hake. By driving the company into the ground, Maytag became an easy takeover target, triggering Mr. Hake’s golden parachute payments. This, of course, is on top of his multi-million dollar annual pay package.
I can see one source of the problem: the Charter of the Compensation Committee, dated 11-11-04 and posted on Maytag’s website, says:
“The Committee’s basic responsibility, on behalf of the Board, is to assure that the Chief Executive Officer and senior executives of Maytag and its wholly owned affiliates are compensated effectively in a manner consistent with the stated compensation strategy of Maytag, internal equity considerations, competitive practice, and the requirements of the appropriate regulatory bodies.”
What’s missing? How about the obvious: that the Committee’s primary job is to ensure executive compensation supports shareholder value creation. The Committee members seem to have satisfied their Charter. Unfortunately, it’s the wrong Charter.
Not only did the shareholders pay dearly, but during this time Maytag’s product quality plummeted, costing customers millions of dollars. I don’t see any mention of “customer” in their Charter either.
That Maytag repairman is really going to be the "lonliest man in town" now because he'll be out of a job while Ralph enjoys his newfound millions. This is why people are angry about executive pay.
3 comments:
Shame on Maytag a company that went from the best to the worst in my lifetime of 53 years and pity to the idiots at Whirlpool for buying a sinking ship and its legacy of distrust and disgust that will be sure to follow. I would love to have dumped my $2400 Maytag Neptune washer/dryer set on the front lawn of Hake or some other unethical icon of Maytag. Maytag stuck me and my husband, the consumer, with a machine that hopped when spinning and imposed 7 service calls on us to fix a hopeless piece of junk. There were no apologies and a lot of insulting/blaming the consumer questions about laundry soap used and heavy items placed in the washer. The final solution was to "glue" the feet to the floor. Maytag repeated told us they would not give us the money we paid for this poorly engineered machine. We took them and the distributor to small claims court. Maytag was so arrogant, they didn't bother to show and the distributor got stuck with the financial obligation. We're going back to court to drag Maytag's butt in as a lone defendant so we can obtain a judgment for the water damage caused by a flood when the machine hopped so far it pulled the drain hoses out of the wall. We were informed that Maytag would probably appeal any judgment and has a history or such game playing at the expense of the consumer.
Maytag is just another example why the US is heading for 3rd world status.
I believe it was maytage that closed down a plant in Illinois not long ago with no warning and moved it to Mexico, devastating the town because the town was basically built around maytag.
It's not just maytag, I was in Alabama after Ivan for SBA, while talking to some of the people, they told me about how a politican actually gave Lazyboy incentives to relocate a plant to Mexico.
Mabey were putting up that wall along the Mexican boarder to soon, it probably won't be long before we will be sneaking over to Mexico for a job.
The bottom line here is the politican's have sold us out for personal gain. The money these pigs make couldn't be spent in a lifetime. I'm from NY, teacher's get 70-100K a year,some administrators for a small school system 1 million, CEO's of hospitals, 1.5 Million and up,and the list goes on.
Since they want us to live like dog's, stop buyng their goods, make do with what you got, when things break, call a repair man instead of buyng a new one, if people got out of the "gotta have the newest one with all the usless gadgets" thinking,mabey it would slow down, allthough I doubt that will happen, after all, the TV is in control, and we follow it's lead no matter where it takes us,just look at Iraq.
Get back at Maytag and fix your Neptune yourself! See www.neptunewaxmotor.com for lots of Neptune information.
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