Detroit to Link Pay to Performance. Which Industry is Next?

by Vault Careers | January 13, 2011

  • My Vault

"We need to somehow link the performance of the business to the workers. I am quite willing to start working with the UAW to get this done."—Chrysler CEO Sergio Marchionne, quoted in today's Wall Street Journal.

"We are looking at various proposals linking employee compensation to company performance, which could include quality as a metric."—A Ford spokesperson, quoted in the same Journal piece.

Clearly, there are attempts afoot to restructure how Detroit workers are remunerated—something that's been in the cards for a long time, and that may make all the difference when it comes to making the companies viable once more. It may also help to keep auto workers' jobs in the U.S.: another Journal dispatch from the Detroit Auto Show today reports that Volvo is considering importing cars made in China—a move that "could make it among the first to bring China-made vehicles to the U.S."

One wonders, however, how far up the line the principles espoused by Chrysler and Ford's respective representatives will go. Will executive pay be linked in the same way to the performance of the firm? And if so, are we likely to see such radical concepts spreading to other sectors? Imagine the possibilities: banking execs taking home a mere five-figure bonus after an appalling year. Stock options being rescinded. Leadership roles being outsourced to lower cost countries if profits dip. Even—gasp!—suspension of corporate jet privileges for underperformers. Who knows where it could end?

In their continued attempts at turning their industry around, is it possible that Marchionne et al are opening a can of worms that will wreak havoc on corporate pay?*

Read More:

WSJ: Merit Pay Pressure on UAW is Rising
        Volvo Mulls China-Made Cars for U.S.

* Of course it's not. But then again...

--Phil Stott, Vault.com

Filed Under: Salary & Benefits

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