Welcome to the Pay and Performance blog, hosted by internationally-recognized compensation expert Fred Whittlesey, Principal Consultant of Compensation Venture Group, Inc.
Wednesday, November 23, 2005
When Nobody Likes Your Pay Plan
This is what Delphi Corp. accomplished with their executive compensation proposal. Apparently the rank-and-file employees at Delphi are terribly overpaid, so they will need to take a reduction from a current average wage of $26 to about $12.50 per hour. The executives and managers at Delphi, as the CEO describes the situation, are terribly underpaid and need approximately $500 million, including 10% of the equity in the post-bankruptcy company, to be retained and motivated.
I forgot to mention that aspect of the story. Delphi filed for bankruptcy, and the executive and management team that presided over that failure - including accounting fraud and a $400 million underfunding of the employee pension plan - is the team that needs to be retained and motivated.
On 5 January, a U.S. Bankruptcy Court Judge will hear the proposal.
The New Share Plan Metrics
Until recently, the ubiquitous use of stock options made competitive comparisons a relatively easy process. Now, significant changes in plan design - triggered by new accounting rules, the corporate governance climate, and emerging "standards" from a variety of constituencies –render the old metrics inadequate. Overhang, run rate, Black-Scholes values, and other measures give an inaccurate view of pay levels and value transfer, leading to misguided decisions.
Attend a Web seminar on this topic, presented by Global Equity Organization, on 11 January 2006. http://www.globalequity.org/events/webseminar/index.html#Register