GM Reinstates Executive Bonuses in 2003

DETROIT April 21, 2004; Reuters reported that General Motors Corp. on Wednesday said it reinstated annual bonuses for its top executives based on 2003 performance, when net earnings fell but still beat the company's forecast.

In an annual proxy statement filed with the U.S. Securities and Exchange Commission, the company said its net income and return on net assets were above its target despite the fall in net income.

GM had withheld annual bonuses for its top executives for two years. Last year, GM cited concerns about the uncertain U.S. economic recovery as the reason for withholding the bonus for executives.

GM paid a bonus of $2.86 million to Chief Executive Rick Wagoner and also gave him a 10 percent raise in pay to $2.2 million for assuming the additional duties of chairman, succeeding Jack Smith, who retired last year.

In total, GM paid Wagoner $8.5 million in cash compensation, plus 500,000 stock options that have a present value of about $4.29 million. That rose from cash compensation of $7.0 million for 2002 in addition to 600,000 stock options with a value of about $7.7 million.

GM's net earnings after one-time charges fell last year to $2.98 billion or $5.53 per share, from $3.46 billion, or $6.69 per share in 2002. GM also failed in its effort to raise its U.S. market share for a third straight year, and its global automotive earnings dropped about 55 percent to $1.16 billion from $2.57 billion in 2002.

For the first time in two years, GM paid a long-term incentive award to executives that was based on the company's shareholder return beating the bottom 25 percent of the companies on the Standard & Poor's 500 index.

Under that incentive plan, GM paid Wagoner a $3.3 million bonus.

The 500,000 stock options that GM awarded Wagoner have an exercise price of $40.05 each, and are valued at $4.29 million, according to the Black-Scholes option pricing model at the time of the grant on Jan. 21. However, GM shares have slipped slightly since January. They were trading at $48.25 at midafternoon on the New York Stock Exchange.

The options become exercisable in three equal annual installments beginning on the first anniversary of the grant.

GM also gave Wagoner about $135,000 in other compensation for such items as the use of company aircraft, savings plans and life and accident insurance.

GM also boosted the cash compensation paid to Vice Chairmen John Devine and Bob Lutz. GM paid $6.5 million in total compensation to Devine, up from $5.6 million previously, while Lutz was paid $6.5 million in compensation, up from $6.0 million previously. GM awarded both Devine and Lutz 200,000 stock options with a present value of $1.7 million.