I was in L.A. last week driving down part of Route 66 towards the Santa Monica pier and through Beverly Hills enjoying the nice California weather.
There were more yet-to-be licensed Benzes, Ferraris and Porsches over a three-mile stretch than I’ve seen in the past year. And here I was in an ultra-cool Nissan Cube rental, arm out the window and for a few blocks co-mingling with the rich and famous.
Speaking of… did you read that the Harley-Davidson president and CEO, Keith Wandell, opted not to have his base salary increased in 2011, according to a proxy statement filed with the U.S. Securities and Exchange Commission.
On the surface this – “we’re all in it together” – grand gesture would make a person believe that a CEO who accepts a ZERO increase in salary is saying they’re a team player who wants to make a sacrifice for the good of the company. After all wasn’t it Harley-Davidson management that laid-off hundreds of workers, closed plants and obtained impressive union concessions in a new multi-tiered workforce structure for the survival of the company?
Call me cynical, but when I hear about these it seems more like “camouflage” to deflect scrutiny off the extraordinary set of CEO benefits or at minimum to get publicity and produce significant positive short-term market reaction.
In fact, there are a number of reports which suggest these type of salary tactics are nothing but a ruse or smokescreen as a number of CEOs have adopted these pay schemes. It’s the kind of opportunistic behavior from those wealthier, more confident, influential CEO’s rather than sacrificial acts they are ‘projected’ out to be.
I certainly don’t know if or what Mr. Wandell’s intent was, but we do know his total compensation in 2011 rose nearly 13% to about $7.2 million, compared with $6.4 million in 2010. We also know the motor company paid Mr. Wandell a bonus of $365,639 in 2011. He also received a base salary of $975,037 in 2011, equal to his salary in 2010.
And to be clear this post isn’t about wealth envy or whining about how it must be nice to be rich. We all know that rich people and bankers are beating the system. They’re writing off multi-thousand dollar meals with rare wines at places with unlisted phone numbers that you/I can’t get into. Unless you just woke up in North Korea, then you know that in America, if you don’t like what you earn, where you work or what you do for a living then you’re entitled to leave (quit) and go start a company, further your education or do whatever the hell you want. It’s clear that company’s exist to make a profit for their shareholders and if the shareholders don’t like what the CEO is doing, or earning then they can fire the board of directors to include the CEO.
But wait there’s even more. Mr. Wandell received total cash bonus payments, both discretionary and performance-based, totaling more than $2.8 million in 2011, compared with cash bonus payments of about $2.3 million in 2010. His stock awards were valued at $1.5 million, compared with $1.4 million in 2010, while his option awards were valued at $1.7 million, compared with $1.6 million the previous year. He also received “other” compensation totaling about $175,000 in 2011, compared with about $84,000 in 2010. The payments included $29,600 in lieu of receiving certain perquisites and personal benefits, nonqualified deferred compensation plan contributions of $68,466, 401(k) plan contributions of $31,850, and life insurance premiums of $13,727. He also received additional benefits that totaled $25,478 consisting of financial planning services, personal use of company aircraft and clothing.
What’s the punch line?
Well given that Mr. Wandell has made things happen, meaning that as “Head Honcho” he made moves that H-D insiders historically shied away from. He played hardball with dealers, shed crappy brands, cut labor contracts, made major job cuts and closed plants. Some folks were let go just prior to Christmas, but unfazed he continued to trim the fat and raised cash by selling some old investments, like Harley’s semi-secret test track in the Everglades. He also challenged Harley’s own traditional norms by altering its marketing strategy to attract non-traditional segments, like women and minorities. He also embarked on an international growth strategy that will eventually bring the all the products, the parts, the lifestyle, and the American V-Twin to enthusiasts worldwide. The financial numbers speak for themselves.
All this from a guy who came to the Motor Company and did not even ride any kind of motorcycle! He’s earned a raise. How hard is it to understand… Harley success = Industry success.
Photo taken by author’s iPhone and post-processed in Snapseed (Nik Software).
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