CHRYSLER Chairman Robert Eaton will collect $70 million in cash and stock when the merger with Daimler-Benz is completed later this year.
That dwarfs the pay of his counterpart, Daimler-Benz Chairman Juergen Schrempp, and highlights a sensitive issue for the combined company. American executives are paid much more than their European counterparts.
A merger report released by Daimler to its shareholders said that pay for its top executives should be competitive 'with regard to the type and variety of programs as well as the amount of remuneration.'
Chrysler's top five executives will collect $8.5 million in cash and $159 million in DaimlerChrysler stock.
The cash is a performance bonus paid under Chrysler's incentive compensation plan that normally would have been disbursed to the executives in February 1999.
The early bonus was announced in the proxy statement and prospectus that Chrysler filed this month with the Securities and Exchange Commission.
Chrysler and Daimler-Benz stockholders will meet separately on 18 September to vote on the proposed merger into DaimlerChrysler AG.
Under the plan, Chrysler will become a wholly owned subsidiary of DaimlerChrysler, and Daimler-Benz will merge into DaimlerChrysler.
The bonus money is based on an executive's performance during 1998 up to the time of the merger, and is awarded by the Management Resources and Compensation committees of Chrysler's board of directors.
In all, 30 Chrysler executives will receive cash payments totaling $23.4 million when the two companies merge.
Daimler-Benz did not disclose executive pay levels in its merger report. But Daimler executives earn far less because they receive only modest share options.
'We are working on finding new structures for both sides that are fair and competitive within the industry,' said Daimler-Benz spokesman Eckhard Zanger. 'It is not possible to increase the pay of the Germans all at once, just as the Americans' pay can't be reduced. The basic salaries are about the same. Stock options make the big difference.'
Daimler introduced stock options in 1996. The original plan was intended for 170 senior executives, but Daimler expanded it last year to include 1,600. Last week, a court in Stuttgart upheld the stock plan against a challenge by University of Wuerzburg management professor Ekkehard Wenger.
In the merger report, Daimler said 'a pay plan more closely linked to the company's success is necessary.'
Last year, 10 members of Daimler's management board earned about $11.2 million between them. Schrempp, who is thought to earn $1 million to $1.5 million a year, plus stock options, says the pay issue is complicated, but not insurmountable.
'It is a topic, but at the moment not our No. 1 priority,' Schrempp said. 'We'll find a way that makes both sides happy.'
Merger plans call for Eaton and Schrempp to run DaimlerChrysler as co-chairmen for three years. But if Eaton's contract is terminated before that three-year period is up, he will receive a $24.4 million lump-sum severance payment.
Three other key Chrysler executives are protected.
Under the merger plan, the 30 executives holding Chrysler stock options will be given DaimlerChrysler stock in its place.
Eaton would get 628,277 DaimlerChrysler shares with a value of $66.2 million.