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Long after we’ve all forgotten what he actually did or did not do for General Motors, America will remember CEO Rick Wagoner for his injudicious use of executive privilege. Wagoner and his colleagues at Ford and Chrysler gained notoriety for flying in three separate private jets to Washington, in order to ask Congress for a multi-billion dollar bailout. Four months later, Wagoner has resigned as a condition of this bailout and been replaced by Fritz Henderson, GM’s current president and chief operating officer.
Wagoner’s resignation is perhaps not entirely deserved, since he is certainly not the only CEO who has made bad decisions and been forced to beg the government for money. But his case is a healthy reminder that even executive positions are tied to performance. Companies—and, in the case of firms that the government has bailed out, taxpayers—reserve the right to hire and fire even top-level management as they see fit.
We can’t fairly blame all of GM’s decades-long troubles on a man who has been CEO for only nine years. High cost union contracts and close competition from rivals like Toyota made Wagoner’s job a difficult one. And, to his credit, he closed unnecessary plants, laid off workers, and renegotiated union contracts in an attempt to streamline the company. But he did little to pull his company out of its unsustainable reliance on sales of sport utility vehicles and trucks, which plummeted when gas prices rose to $4 per gallon last year. It is largely this reliance that has led GM into its current crisis.
Whether it is Wagoner’s fault or not, however, GM’s current position is financially untenable. The auto company is dependent on government handouts, and there are no signs that its status will be able to stand on its own any time soon. Thousands, even millions, of jobs and a significant part of the American economy (especially the battered manufacturing sector) depend on GM remaining afloat. Whether or not pulling GM out of the red is possible at this point, though, it is clear that Wagoner is not the person for the job. By urging his resignation, the Obama administration is showing other executives that it will not allow CEOs who fail to make their companies viable to remain in their positions.
Of course, Wagoner’s “retirement” was a delicately orchestrated affair. Few people, after a career of executive perks, can complain about a pension from a company that is currently operating on taxpayer funds. A deal like this does not exactly send the message to other executives that they will be penalized for failure.
But the very fact of Wagoner’s resignation serves as a reminder that executives can be held accountable for their performance. Wagoner was one of the most visible CEOs making bad decisions and, until now, receiving little chastisement for it. While it will not likely be repeated in every company that is doing poorly, a resignation like Wagoner’s tells executives in other industries, especially corporate finance, that their jobs are still contingent on performance. If they do not lead their companies to success, they will be held responsible.
We certainly have not seen the last of the days of executive privilege and overcompensation, but the symbolic action of forcing Wagoner to step down is a move in the right direction. We know you hate to go, Rick, but your Suburban’s waiting.
Ellen C. Bryson ’11, a Crimson editorial writer, is a history concentrator in Cabot House.
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