"How GM Justifies Lower Pay For Its First Female CEO"
As it stands, Mary Barra, incoming General Motors (GM) CEO and first woman to lead the company, has a pay package that is significantly lower than what was given to her male predecessor, Dan Akerson.
What is currently known is that her base salary is less than Akerson’s — $1.6 million versus $1.7 million — and her short-term compensation is as well, $2.8 million compared to his $7.3 million. That means the maximum annual incentive she can earn this year on top of her base pay is under $3 million, although Akerson will make $4.68 million as an outside senior adviser.
Some have pointed out that her pay will likely go up after a shareholder vote in April on her long-term compensation package. There is no way to know how much her long-term package will be or what it will include, although it will likely be substantial. A company spokesperson also told ThinkProgress that Akerson didn’t have any long-term incentives “for reasons we all now know, he was not staying with the company.”
So what is long-term compensation typically comprised of? Mostly stock that is only paid out after a certain period of time goes by or certain performance metrics are achieved, typically over a three- to four-year period, according to Steven Hall, a managing director of executive compensation consultancy Steven Hall & Partners, who spoke with ThinkProgress. As Bruce Ellig, author of The Complete Guide to Executive Compensation, pointed out, the pay could be seen as early as two years or as far away as ten years, and may or may not be prorated.
This is typical in an effort to “not only align pay with performance, but also to align the executive with the interests of shareholders,” Hall said. “Shareholders own stock in a company, so the more that we can pay them in the form of stock or give them the opportunity to earn stock, the better alignment we’re creating.” The GM spokesperson told ThinkProgress that Barra “is going to be CEO for a long time.” But if she were to for some reason leave earlier — if she were poached by a competitor, say — she would likely “leave a lot of that stuff on the table,” Hall noted.
When asked about the difference in base pay, the company spokesperson noted that Akerson was acting as both CEO and chairman — Barra will not serve as the latter, as the job has now been split off to someone else — and that he had been a CEO at “a number of high-profile telecom companies.” But he was still an unknown quantity when it came to running a car company, with no experience in the industry, and one that was in deep distress. Barra hasn’t been a CEO yet — she’s been too busy working at the company for three decades. But she is still not paid as much as he was despite her loyalty, dedication, and past performance. Studies have found women are often trapped in this cycle: men are paid on their potential, but women are paid on their past performance.
The company has promised that Barra’s long-term compensation package will “dispel any notion of pay inequity.” But it’s worth keeping in mind the details of the differing pay packages.