Ford Motor Co. awarded $16.7 million in compensation to CEO Jim Hackett in his first year in the role as the former office furniture executive attempts a tricky turnaround aimed at reversing a stock slide, reviving profits and preparing the nearly 115-year-old company for the autonomous age.
Hackett, who took the top job in a management shakeup last May, received $1.3 million in salary, $1 million in bonus and $14.4 million in stock and other compensation, Ford said on March 29 in a regulatory filing. His total for 2016, when he was running Ford’s nascent mobility business, was not revealed because he was not among the company’s top paid executives at that time.
Hackett, 62, is working to overhaul Ford’s lagging lineup while also spending billions to develop self-driving cars and electric vehicles to prepare for the profound changes expected to upend the auto business in the coming decade. The former Steelcase Inc. CEO is shifting spending away from slow-selling cars to develop new sport-utility vehicles so Ford can reverse market share losses in that hot segment. To pay for those new models and bets on future technology, Hackett has warned that Ford’s profit will fall this year. Investors have traded shares down about 11% this year.
“Given where the stock price is, investors don’t want to see an excessive compensation package,” David Whiston, an analyst for Morningstar Inc. in Chicago. “But you have to balance that with the need to retain talent.”
Earlier this month, rival Tesla Inc.’s shareholders approved the largest compensation deal in history for its CEO, Elon Musk. If successful, the award could end up being worth more than $50 billion.
For the first time, Ford provided the ratio of the CEO’s compensation to the average worker, as required by a new federal mandate. Hackett’s annualized pay was 285 times the $87,783 earned by the company’s median worker.
Ford’s board ousted Hackett’s predecessor, Mark Fields, after shares fell about 35% and the company lost nearly $25 billion in market value during his nearly three-year tenure as CEO. Fields received $21 million in compensation for his partial year of work in 2017, excluding a stock incentive grant that was canceled when he left. That compares with compensation valued at $22.1 million in 2016, his last full year as CEO.
Top executives reached an overall average of 100% of the 2017 targets set for them by Ford’s board, according to the proxy. That included 133% for automotive revenue, 55% for automotive operating margin, 106% for automotive operating cash flow, 146% for Ford Credit pretax profit and 107% for quality.
Dearborn, Mich.based Ford’s pretax earnings fell by $1.9 billion last year amid higher prices for commodities such as steel and increasing costs for warranty repairs. The carmaker was hit harder by rising commodity prices than its rivals and has said its costs are too high, which is why Hackett has set a goal of slicing $14 billion in expenses. Analysts say the bulk of Ford’s profits continue to come from the F-Series pickup, which saw U.S. sales rise 9.3% last year.
Executive Chairman Bill Ford received total compensation of $15.6 million for 2017, compared to $13.9 million in 2016. Excluding pension values and other compensation, pay for the 60-year-old great-grandson of Henry Ford rose 16% to $12.9 million, from $11.1 million in 2016.
The company scheduled its annual meeting for May 10 and it will be conducted online for the second year in a row. Shareholders for the 14th consecutive year will consider a proposal to strip the Ford family of its 40% voting control of the automaker and move to one vote per share. The measure is opposed by Ford’s board, which includes two family members, Bill Ford and his cousin Edsel Ford II.
By Keith Naughton