GM: The price of government ownership

So many people have fled the Motor City that the population has decreased by 50 percent since 1950 (see Bill Johnson nearby). But the reasons are deeper than the crime, government missteps, and bankrupt businesses that have taxed city resources.

In fact, the federal government still plays a substantial role in stifling the city’s growth.

As recently reported, General Motors has requested a $2.2 million raise for its CEO from the House Oversight and Government Reform Committee. The biggest of the Big 3 has been reduced to a child asking its guardian for a bigger allowance.

It seems outlandish that the government would monitor CEOs’ salaries – but when they are funded by taxpayers, perhaps it’s warranted. As GM suffers the consequences of the 2008 and 2009 bailouts, let’s not forget that government money does not solve everything. In truth, it often makes things worse.

GM’s executive suite has  limited control until the government sells off its remaining 19 percent stake. Though Washington officials project that the company will fully regain its private status by the spring of 2014, the Treasury Department until then has the right to review and manage company costs – including the pay of top executives. As a Treasury official reiterated: “I would note that just because a company makes a particular proposal does not mean it will ultimately be approved.”

GM CEO Dan Akerson currently makes $9 million – compared to his Ford and Chrysler counterparts who make $29 million and $22 million respectively. He has already lost an estimated $100 million since he moved from a private equity firm a year ago. Morningstar analyst David Whiston summarizes: “He made it pretty clear he was giving up a large amount of money to do a public service to help an American company.”

When did working for a company become a public service? The moment the government adopted them into the federal family.

Akerson recognizes his position for what it is: Employment by the people. Sure, it’s good for the economy and the community, but business is primarily motivated by self-interest. Self-interest in investments that will be worth making, that will offer a service to people who desire it, and that will lead to a prosperous society.

Even when government officials supervise businesses, they don’t act in charity as much as in the interest of the government itself, whether they want voting favors, green go-carts, or union approval. In the case of GM, federal involvement has reaffirmed one consensus among the Big 3: government money isn’t free.

It comes with a price so large that it burdens the market – not to mention taxpayers.