The Globe and Mail reported today that Magna International had “taken an axe to executive pay.” It didn’t.
In 2009, company officials will not take home as much as they have in other years, but not because of any cuts agreed to by management. In fact, if truth be told, the Magna gang will get more than can be justified by the Magna constitution, which has been used so well to justify past compensation levels.
As I noted in my blog yesterday, the global auto-parts company has long justified its huge executive paycheques, not to mention the mountain of cash it hands out to part-time chairman and controlling shareholder Frank Stronach, by noting executive compensation is tied to a fixed percentage of pretax profits by the so-called Magna Carta. Nobody has cut that percentage. What has happened is that Magnas pre-tax profits have been hit hard by economic turmoil and exposure to the fate of Detroits Big Three.
During tough times, Magna executives are supposed to live off their salaries, which are still a significant six figures. The salaries have not been cut, either. Instead, the company is topping them up because performance pay has tanked with profits and Magna now insists that its officials, including Stronachs daughter Belinda, should not be forced to live up to the spirit of the constitution.
Stronach loves to boast about being different. He has repeatedly insisted that the big payouts only happen at Magna when there are plenty of pre-tax earnings to distribute to executives, workers, investors and society. But under the direction of lead director Mike Harris, who took home more than $600,000 last year for being a self-proclaimed slave to the Magna constitution, the rules have been changed to ensure Magna executives don’t have to survive on less than seven figures. Thats despite all the money they accepted under constitutional rules in the past.
Stronach himself isn’t getting a top-up, which he would not deserve. After all, he has always told me that his real role at Magna is to make sure that the executives and directors he put in place live by the constitution that justifies his dual-share powers and multi-million-dollar consulting fees.
DOUBLE TAKE:Aside from trying to promote myself while generating Web traffic that helps put bread and butter on my table, this blog aims to stir debate by taking a harder look at current news and events. I obviously enjoy voicing my own opinions, but I am a big boy and I welcome all comments that dont require R ratings. So let me have it via this blog or send me an email at firstname.lastname@example.org. I reserve the right to post email comments without disclosing the senders name. If you dont think I am a total twit, follow my DOUBLE TAKE posts via my NotSOCRATES Twitter site at http://twitter.com/NotSocrates
THOMAS WATSONis a Senior Writer and editorial board member at Canadian Business magazine. Since winning a community journalism award as a cub reporter with the Hamilton Spectator in the early 90s, he has covered business, finance, politics and technology for various news outlets. Prior to joining CB in 2001, he reported on the steel and automotive sectors for the Financial Post. Watson received his first magazine award nomination for exposing a stock manipulation plot aimed at Waterloo, Ont.-based Open Text in 2000, when he was head of investor relations for an international venture capital outfit in the City of London. Watson holds graduate degrees in journalism, international relations and public finance and undergraduate degrees in history and politics.