GM execs will cash in big time
If you owned GM stock or were a creditor before the government takeover of the company, you got hosed in the process. (details here) You essentially took a 1 – 100 reverse split (meaning you got one share for every hundred you owned). Almost all investors and creditors were wiped out but the unions benefited nicely. This would not have happened in a regular bankruptcy but the government used your money to turn the bankruptcy process on its head.
This article (from USAToday) reveals that the very GM executives responsible for the crash of GM will be rewarded handsomely once GM issues new stock.
Having laid off workers and cut pay and benefits, some top General Motors executives are lining up to reap their rewards.Seven senior GM executives will get stock valued at about $7.5 million as part of their pay packages, GM said today in a regulatory filing reported by the Associated Press.
Under the stock deal announced today, the AP says the execs must wait at least a year to cash in the shares. By then, the new post-bankruptcy GM may be selling shares to the public again. Some shares require a three-year wait. Because GM is still private, the company hasn’t disclosed what it is paying its top executives. That information is supposed to come later.
Their cash salaries are subject to federal oversight and limits on pay for top executives for bank, auto and other companies that took federal bailout money, so they are getting a portion of the pat in stock and also getting incentive shares if they meet GM board goals. The shares’ value, since the company is not yet publicly traded, is estimated for the filings by a third party. At the end of 2009, according to Reuters, that estimate valued the shares at $53.98.
Nice. Once again, the government picks winners and losers. In this case, the GM fatcats are the winners. Former GM stockholders, creditors, and US taxpayers are the losers.