Delphi executive salary cuts are symbolically important
The decision by Delphi Corp. executives to reduce their salaries communicated an important message to their employees that will reduce the mistrust between labor and management.
Delphi chief executive officer Steve Miller made a wise strategic move when, just days before declaring bankruptcy, he upped severance packages for executives who would need to be involved in restructuring the company. Bankruptcy, he knew, would give them every incentive to jump ship. It would also attract headhunters who would try to hire those executives to jobs in less troubled companies.
Clever strategies are not always wise ones, however, and it is to Mr. Miller's credit that he recognized the difference. He voluntarily waived millions of dollars in his own salary, a particularly noble gesture given that he — hired in July — had nothing to do with Delphi's increasing financial difficulties.
Other executives likewise reduced their compensation, most by 10 percent.
Mr. Miller will attract considerable wrath in coming months as he fulfills his hatchet-man role. Before he leaves the company, he will have laid off thousands of employees, reduced hourly wages, increased employee health insurance costs and devastated pensions promised to Delphi retirees.
So far, though, he has been an excellent communicator. Not only has he explained to Delphi employees the severity of the company's problems, he has helped the nation understand that every U.S. industry needs to begin confronting wages and inefficiencies that cannot survive in a global economy.
The voluntary salary reductions are more symbol than substance, but positive symbolism is important as Delphi employees face the painful days ahead.