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Keith Wandell Resignation Letter

The news was expected.

Harley-Davidson CEO Keith Wandell, citing the pressure of obtaining a motorcycle endorsement and regularly commuting with “cagers”, today announced he is retiring at the relative young age of 60.

It’s through my privileged relations with some of the major actors of the motorcycle industry that allow this blog to offer you an exclusive first look of the resignation letter below:

Date: April 1, 2010
To: Harley-Davidson Employees
From: Office of the President and CEO, Mr. Keith Wandell
Subject: A Letter To My Colleagues

This morning I am announcing my intention to retire by the time of our next board meeting.

It has become clear that in light of the continuing leadership doubt, and the unprecedented level of negative attention about my compensation package, the company – and each of you – has had to endure, that the best thing I can do for you, our dealer network and our shareholders is to retire.

Some of you have done an extraordinary job serving our customers despite the almost daily media distraction.  I feel strongly that the attacks about my riding experience and eight month compensation package of $6.4 million are unjustified, but unfortunately, they show no signs of abating. A simple reality check tells me that people are spending more time reading about the acrimony and not enough time buying our motorcycles from the newly reduced product line up.

What matters is not what happens to me, but it’s really about the remaining employees of Harley-Davidson, our employed customers and our shareholders. The whole is greater than the sum of any 2 parts and clearly more important than me “feeling good about where we are” as a company.   Even in the midst of the first quarterly loss in 16 years, the HDFS liquidity freeze, the India expansion, the Buell distractions, the union worker delinquencies in PA., and the MV Augusta sell-off strategy… my main regret in this short, but well paid, tenure, is that I will not be here to realize the potential of this bold strategy to return the company to a “new” normal.

I will retire when my successor is appointed. The Board has begun a high profile and expensive search for a new CEO, led by the head of the Board’s Compensation, Management Development and Succession Committee. I, of course, will do everything I can to assist in this transition. I will make sure that the company firmly “stays the course” until my successor is chosen.

Let me say that it will not be easy for me to leave. I take enormous pride in obtaining my motorcycle endorsement and I’ve met a bunch of new lunch-time riding buddies.  It’s been said that the true test of a leader is the performance of the company he leaves behind. On that score, I feel my short, but well paid legacy and public record are available for all to read.  The Board has asked me to assure you of their full support as we go through the transition and into the future.

To some of you, I offer my heartfelt thanks for the extraordinary opportunity to work with and lead you during this short tenure that I’ve been in Milwaukee. Of course I will continue to see some of you in the H-D Brewers suite and have enormous faith that the best of Harley-Davidson will be lived in the days ahead.

Sincerely,
Keith “Scooter” Wandell
President and CEO, Harley-Davidson

Happy April Fool’s! Enjoy the day even with all the faux news.

Photo is courtesy of H-D.

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Keith E. Wandell, CEO Harley-Davidson

$6.4M to be exact. 

May 1st through the end of 2009 marked eight months on the job for Keith E. Wandell, the CEO of Harley-Davidson Inc., and for that privilege he was delivered a pay package valued at $6.4 million, according to the Associated Press.  

The company ended the fourth quarter with a loss of $218.7 million, its first quarterly loss in 16 years.  In addition, management spearheaded a slashing strategy which included massive employee layoffs, closing of factories, negotiated union concessions under the threat of plant re-location and shuttered or sold unwanted brands.

But, talk about an obsession with fairness!  

The board delivered a pay package to Mr. Wandell with a base salary of $650,025 from his start date and he received a bonus of $780,030 and stock and option awards valued at $4.9 million at the time they were issued.  He also received other compensation worth $22,515, which includes a cash payment of $19,733 instead of perquisites.  In total it was valued at $6.4M.

For those in the job market who survive on high-end discretionary spending by consumers, might take a moment of pause and wonder if Mr. Wandell’s approximately $26,700 per day compensation package is just a bit tad excessive?

True it was during a time that management seemed caught like a deer in the head light as they watched the company’s outbound shipments decrease by more than 25%!  I’m not taking shots at the employees.  These executive compensation issues have been around for a long time, and much of the company performance blame lays right at the feet of management and specifically the previous CEO, Jim Ziemer, who takes the golden parachute award for world-class nonperformance during his last year.  Talk about setting up his predecessor with competitiveness and cost structure issues. 

But, is it an excuse for the CEO to say, ‘Hey, the board gave it to me.’ Or should CEOs be responsible too and provide leadership when compensation packages defy economic logic?!  Mr. Wandell is a very capable executive who chalked up impressive business success.  Yet, significant rewards for great results can still be attacked. Especially if the rewards for CEOs and their teams become extraordinarily high with no link to performance – and shareholders are left holding the bag – then it undermines people’s confidence in the company itself.

What are the results at H-D?  But, it’s only been 8 months you say.  Exactly my point.  The one bit of positive news on H-D that I found is that the daily average on HOG’s stock value has risen about 20% since Mr. Wandell has moved in and taken the helm.  

Photo courtesy of H-D. 

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elevator_doorsI’ve alerted people to the fact that the groundwork is being laid for a new kind of Harley-Davidson company in the future.  It’s anticipated they will need to aggressively streamline brands, shrink capacity and either eliminate or phase-out certain poor performing models. 

Then this past weekend while many of us were in the Nevada desert, hundreds of rain soaked shareholders packed the Harley-Davidson Museum in Wisconsin to hear the top executives plans for the company.  Or as retiring CEO James Ziemer put it… “one of the most challenging economic times since the Great Depression.”  The Milwaukee Business Journal has more details HERE.  In short, Barry Allen, a director since 1992 was elected as the new board chairman and shareholders voted to end the class structure of company’s director terms.  Essentially putting the board on notice through an annual re-election process.  Also former CEO and current board of directors chairman Jeffrey Bleustein’s formal involvement in the company came to an end.

Ziemer stated that “the company’s fixed cost structure is simply too high.”  They plan to reduce excess capacity and make changes to be more competitive for the long term.  Several shareholders booed Ziemer on the decision to consolidate factories.  Does this imply Harley will now need to consider new China-based facilities to offer a world-class cost structure?  Would manufacturing motorcycles in China disrespect the rich heritage of the Harley brand and the importance of the Americana culture?  In today’s world I’m not so sure it matters to the price savvy consumer.

And speaking of the economy it’s not a surprise, but odd that Harley-Davidson did NOT participate in the Laughlin River Run last week.  Given that customers are now investing more in their current motorcycle vs. trading up you’d think that the largest west coast motorcycle rally is not an event to be snubbed.  Most all the Asian brands were well represented and HD being absent was clearly noticed.

Lastly, either in a sign of these recessionary times or nostalgic admiration for his remarkable 40 year career, the employees presented Ziemer with the original wood doors from the freight elevator he operated when he first was hired at Harley-Davidson.  Ziemer’s 2008 compensation ($5.6M) should allow him to build a new wooden ‘man’ shack to admire those elevator doors during retirement!

Photo courtesy of HD

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trainThe money train…. Wow … I think I just had a flashback. A warm sunny afternoon sitting on the hill overlooking the river. The birds singing in the trees, everything is so bright and colorful.  Oh wait weren’t we talking about Harley-Davidson?

Harley announced today its second round of job losses since the beginning of the year with a cut of up to 400 more positions, including up to 80 at its Milwaukee-area factories over the next two years.  The company reported a 37% drop in first-quarter profit as net income fell to $117.3 million, or 50 cents a share, from $187.6 million, or 79 cents, in the year-ago period. Revenue declined to $1.29 billion from $1.31 billion. Harley’s worldwide motorcycle sales declined 12%, and U.S. retail sales declined nearly 10% from last year’s first quarter.

And speaking of riding the money train…we learned this week that the new Harley CEO Keith Wandell, will receive a base salary of $975,000 plus other compensation according to SEC filings.  Wandell, replaces current CEO James Ziemer on May 1, and will also participate in the company’s short-term incentive plans with a total opportunity of 120% of his base salary and a maximum payout of 240% of his base salary with a cap of $3 million, his 2009 payout pro-rated based on salary earned for the year.  For comparison purposes, Forbes provides details on Ziemer’s comp plan is HERE.

Talk about a nice run up from his Johnson Controls base salary of $441,670 plus bonuses.  However that number is a bit misleading because compensation for the “chief” executive typically includes: salary and bonuses; other compensation, such as vested restricted stock grants, LTIP payouts and perks; and stock gains which is the value realized by exercising stock options.  In truth, Wandell’s total compensation as reported by Forbes was $9.7M.  Does anyone think he took a salary cut in moving to Harley?  Might I suggest it’s an over payment for services rendered?  Shall we just chant “U.S.A.!, U.S.A.!” and feel good that CEO pay is more than an order of magnitude above the average line worker?

I suspect that Wandell is pinching himself …paid nearly a $1M to lead the premier American based manufacturer of heavyweight motorcycles yet somehow landed the gig without a riding endorsement or owning a motorcycle…excuse me for a minute while I go puke.

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