Sizing up automotive CEO pay

July 2, 2012: 1:55 PM ET

As the global car industry gets back up off the pavement, executive compensation is changing.

By Doron Levin, contributor

carlos_ghosn

Carlos Ghosn

FORTUNE -- One view of Nissan CEO Carlos Ghosn's salary of $12.5 million in 2011 is its relation to those of his peers at Japan's top automakers. It's the biggest by far.

On a global scale, Ghosn earned less than half of the $28.9 million that Ford Motor (F) CEO Alan Mulally brought home. Ghosn and Mulally both made their reputations as turnaround specialists, leading their companies from the brink of disaster to prosperity.

CEO pay may never strike the average worker as rational. In the rarified air of the corporate suite, competition is hot and heavy among automakers to hire an executive with the chops to lead a large complex manufacturing organization that operates worldwide. The number who have failed suggests it's not an easy job. As Ashvin Chotai of London-based Intelligence Automotive Asia told Bloomberg News, Ghosn "has done an incredible job in the 10, 12 years turning Nissan into a very solid company again." He called Ghosn's salary "a small price Nissan has to pay for his success."

Toyota (TM) CEO Akio Toyoda earned $1.7 million in a year that was one of the weakest in the Japanese automaker's history, as it recovered from disruption caused by earthquake and tsunami as well as lingering fallout from safety concerns in the U.S. Toyoda's pay was the same as the year before. Honda's (HMC) CEO Takanobu Ito actually took a 5% cut in pay to $1.54 million in 2011, a year in which Honda also suffered from earthquake-related disruptions and a nearly 7% slide in U.S. sales.

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Japanese CEOs are usually paid far less in salary than Western counterparts, though their compensation often includes perks such as cars, houses and club memberships. Nissan (NSANY) says it benchmarks the pay of its executives against those of multinationals, especially those with diverse nationalities in its executive ranks -- a characteristic that distinguishes it from Toyota and most Japanese companies.

According to the Nissan study, CEOs at major industrial companies worldwide were paid an average of $16.1 million in 2011, while the average for automotive CEOs was $17.5 million.

Behind Mulally but leading the rest of the world's automotive CEOs in pay was Martin Winterkorn of Volkwagen AG. Winterkorn received $23.1 million, a sum that seemed to match VW's prodigious profit of $19.6 billion, second highest among all automakers after Ford. Winterkorn's Mercedes counterpart in Germany, Dieter Zetsche, was paid $11.4 million for the year.

Sergio Marchionne, whose wizardry so far has saved Chrysler and Fiat from liquidation, earned $16.2 million last year. He will need even more magic going forward because the two companies, which are in the process of becoming one, don't build enough vehicles to be a sustainable enterprise. That judgment is Marchionne's, who has called for closure of excess automaking capacity in Europe -- so far with little result.

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In the U.S. the smallest paycheck was drawn by General Motors (GM) CEO Dan Akerson. His $9 million compensation wasn't paltry, it simply reflected the politics and optics of what's acceptable for a company that went through bankruptcy in 2009 and is 25%-owned by the U.S. government -- five months before a presidential election.

Ghosn also may be feeling a bit of salary pressure from government -- the French government, which owns a stake in Renault. For his Renault work he receives about $3.7 million. In light of his duties at Nissan, perhaps the Renault board sees Ghosn as a part-time worker.

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