Executive salaries in the automotive industry: crazy or justified?

Executive salaries are a hot topic these days, mostly due to the huge bonuses paid out to executives in the financial industry, at companies that needed government aid during the global financial crisis. And the French have always been exceptionally sensitive about this topic, as a country with strong unions and an a socialist government.

Renault_Nissan-CEO-Chairman-Carlos_GhosnSo when the Renault board voted to almost triple the 2014 salary of its CEO and Chairman Carlos Ghosn to € 7,2 million in cash and share options (up from € 2,67 million in 2013), it shouldn’t come as a surprise that 5 of the 19 board members voted against the proposal, including those of the French state, which still controls a 15% share in Renault. What these board members must have failed to realize, is that Renault’s net income has also tripled, to € 1,89 billion thanks to sales successes of the Renault and Dacia brands in Europe and continued benefits from the alliance with Nissan.

Ghosn has been in charge of Renault for 10 years and helped to make the alliance with Nissan perhaps the most successful in the automotive world ever, he’s led Nissan for 15 years, and he’s known for setting audacious goals and then achieving them. Renault met 90% of its financial targets last year, even despite increased difficulties in some of its most important markets outside Europe, including Argentina, Brazil and Russia, and being fashionably late to the party in China, which booming growth rate is already cooling.

On top of his salary from Renault, Ghosn also receives a similar payday from Nissan, which came in at almost Y 1 billion (€ 7,6 million) in 2013. This would bring him on par with the salary for Daimler CEO Dieter Zetsche, who earned €14,4 million in 2014.

Sergio-Marchionne-Chrysler-FiatBut both men’s salaries are easily dwarfed by Sergio Marchionne’s, Chairman of Fiat-Chrysler Automobiles. According to a research by Automotive News reporter Larry P. Vellequette, Marchionne earned a whopping $ 55,5 million in cash, bonuses and benefits, but that figure grows even further when equity-based compensation is included. Depending on how you calculate, the figure could easily grow north of $ 100 million.
I think Ghosn’s increased salary package is still in line with his performance, keeping in mind how he’s merged two struggling companies with greatly divergent cultures and built them into a financially healthy global powerhouse, and has successfully re-introduced the Dacia low-cost brand. But for Sergio Marchionne, considering he works 24 hours a day, I just don’t see how he’s ever going to spend this kind of money. You could argue his stock options are an extra motivator to keep the company healthy in the mid- to long term, as he’ll want to keep the price of his stocks up, but then I’d reply that in my view, he’s really just in it for the game and not for the money, otherwise he wouldn’t have been able to keep up such work ethics and pace for the past ten years.

About Bart Demandt

Bart is a 36-year old Dutchman who’s always had a thing for cars, the automotive industry and statistics. He’s combined these passions by writing about them on CarSalesBase.com. His daily driver is an Alfa Romeo GT 3.2 V6 which he just can’t seem to say goodbye to thanks to the mesmerizing exhaust note.
You can find all his articles Here.

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