Feb. 17, 2009— -- How forthcoming has Chrysler CEO Bob Nardelli been about his compensation? Not very, if you ask corporate governance experts.
When lawmakers asked the CEOs of Detroit's Big Three automakers whether they'd be willing to accept a $1 salary, Nardelli assented, but he failed to mention that he was already receiving a $1 salary and had been since he joined the company in 2007.
Nardelli could be earning considerably more than just this minimal salary: It is unknown if Chrysler's majority owner, private equity firm Cerberus Capital Management, pays Nardelli an additional salary or any other form of compensation for running the struggling automaker.
"I would be surprised if the extent of his monetary gain for work at Chrysler was just a dollar," said Charles Elson, director of the Center for Corporate Governance at the University of Delaware. "Chrysler is not a philanthropic activity and I would be surprised if he approached it as such."
The lack of transparency stands out, as it was just last week that lawmakers put the spotlight on the compensation received by the CEOs of some of the nation's largest banks that received taxpayer dollars.
The week prior, President Obama announced new limits on executive pay for institutions receiving government funding. Chrysler accepted $4 billion in January and is expected to ask for additional money from the government in order to avoid running out of funds.
"It should be disclosed how much he is getting from the parent company," said James Reda, an independent compensation consultant. "What is his arrangement with Cerberus? He's the hired-hand to turn it around and, A, it is not working and, B, what is his arrangement now that he is taking government money?"
By comparison, GM, a publicly traded company unlike private Chrysler, has revealed that its CEO Rick Wagoner will earn $1 for 2009 and will receive no bonus for both last year and this year. In addition, GM's board of directors has also reduced its own compensation to $1 for 2009.
Cerberus, Chrysler Not Talking
Chrysler and GM are required to submit their restructuring plans to the president today. One condition for receiving funds through the bank rescue plan, the Troubled Asset Relief Program or TARP, was that both companies had to limit executive compensation such as bonuses and incentive payments, as well as eliminate perks such as corporate jets.
During a congressional hearing in November, Sen. Jon Testor, D-Mont., asked Nardelli, "Back in 1979 when we bailed out Chrysler … Lee Iacocca said that he would take one dollar in executive compensation until those companies became -- until Chrysler became a profitable model. Where are you guys at on a proposal like that?"
Naredelli replied, "I'd be willing to accept that."
According to Nardelli's personal spokesperson, Bob Marston, Nardelli has received that salary since joining Chrysler. Nardelli had a consulting contract with Cerberus prior to the company's acquisition of Chrysler.
Marston said that ended when Nardelli became the CEO of Chrysler. Cerberus announced it would purchase Chrysler from DaimlerChrysler in May 2007. Nardelli was named CEO in August after the sale was completed.
Prior to working for Cerberus, Nardelli was the CEO of Home Depot for six years. He received $210 million when he left the company after being criticized for his pay and the performance of the company's stock during his tenure.
"He was poster child of excessive pay," said Elson. And the package he received when he left Home Depot helped to revive the movement to reform corporate governance and compensation.
Marston said he could only address Chrysler's arrangement with Nardelli and did not know if Nardelli receives any compensation, bonus or incentives from Cerberus for leading Chrysler.
Chrysler referred all questions about Nardelli's pay to Cerberus. Cerberus referred all calls back to Chrysler. Eventually, Cerberus told ABC News, "As a matter of policy, we do not disclose the compensation of the employees of our firm or our portfolio companies."
"You would think given concern around compensation and as gesture of goodwill, it would be a little more transparent about his compensation agreement," said Mark Borges, a compensation consultant with Compensia.
"In order to restore trust, we've got to make certain that taxpayer funds are not subsidizing excessive compensation packages on Wall Street," Obama said when he unveiled new regulations for executives who receive taxpayer dollars through the TARP. "We all need to take responsibility. And this includes executives at major financial firms who turned to the American people, hat in hand, when they were in trouble, even as they paid themselves their customary lavish bonuses."
As lavish compensation, especially at financial firms, has become a central topic of complaint at the White House, on Capitol Hill and among voters, CEOs from several of the nation's largest banks were asked to disclose their salaries and bonuses before Congress.
Similar questions have not been put to Nardelli. Calls to Senate Banking Committee Chairman Chris Dodd, D-Conn., have gone unreturned. A spokesperson for the ranking Republican on the committee who opposed the initial financial rescue plan, Sen. Richard Shelby, R-Ala, said the senator has not looked into the subject. The Treasury Department is looking further into the issue.
In the recently passed stimulus legislation, Dodd championed a provision that imposes strict rules for executive compensation for institutions receiving federal funding through the TARP including "golden parachutes." While public companies have to file documents proving compliance with these rules with the Securities and Exchange Commission, private companies like Chrysler will have to certify they are in compliance with the Treasury Department.
"I don't think Chrylser is immune to those things, but there is no independent way for the public to verify its compliance with those rules," said compensation consultant Borges.
Chrysler Rescue: Public, Then Private, Then Public Again
On its Web site, Cerberus describes itself as "providing both financial resources and operational expertise to help transform undervalued companies into industry leaders for long-term success and value creation."
A few months after Cerberus announced it would buy the third-largest domestic automaker, its chairman, John Snow, spoke in Washington.
"Over 25 years ago, when Chrysler faced bankruptcy, it turned to the United States government for assistance. Today, Chrysler again faces new financial challenges. But it is private investment [Cerberus] stepping in to inject much-needed support. That speaks volumes for the transformation of our economy."
And after discussing the need for fairer rules for auto fleet mileage standards, Snow said, "We are not asking for handouts or special treatment. What we are asking for is a fighting chance to turn this great American company around."
"My belief that the involvement of private investment in the economy, as seen in the Chrysler purchase, offers perhaps the last best hope of turning around the auto industry."
After receiving $4 billion in government assistance, the company's CEO is expected to ask for an additional $3 billion in order to stay in business. What a difference 30 years makes.