This is something that just can't seem to stay out of the news, especially with a Wall Street Journal report that in 2008, Sanjay Jha, the new co-CEO of Motorola received $104 million in compensation. How can a number that astronomically large still exist in these financial times, even if most if it is based on stock options? In 1929, Eugene Grace, the president of Bethlehem Steel, made the most money in the nation. He earned, which in 2009 dollars equals $20.5 million. Clearly Jha makes even five times more than that, adjusting for inflation.
There was a large cry about pay for executive after the financial horrors of the Great Depression. In 1936, Fortune asked in a national survey," Do you think that in general the officials of large corporations are paid too much or too little for the work they do?" 55% of the respondents said the officials were paid "too much." I don't think you could find 45% of people today to think that CEO's are paid too little.
When you ask most people what they think of when they hear CEO and compensation, this image comes to mind. The CEO gets paid too much, and they get it regardless of whether they truly deserve it or not:
We are hopeful that this recession is about to end, and the GDP of the country can begin to grow again. The worry is that executive pay will fall back to it's old traps - where Boards "reward" CEO's and other top level managers with large compensation packages, regardless of the results they have actually produced. It is worrisome to think we as a country could fall back into our same shortcomings, which helped put us in this financial mess that we just had.
In order for companies to not only survive now, but survive in the long run, the leaders there need to remember that now is not the time to fall back on bad habits. They can't freely rewards themselves and board members outrageous salaries, or else we will be right back where we were the past 18-24 months. Leaders need to take the reigns and decide how they want to define their culture. They need to focus on results, and the bottom line (and high pay will affect the bottom line). Leaders now more than ever need to help employees reach their greatest potential. That will be hard to do when the CEO is making 150% more than the employee they are trying to inspire.
The companies that are still around survived this financial Darwinian test. But now is no time to just rest on those laurels. Companies need terrific leadership to continue to steer the ship. One thing these leaders need to remember is the negative PR, both internally and externally, they will have to face if they go back to old compensation models. The best leaders will fully grasps the new nature of corporate ownership and focus on economic performance for everyone - not just their own paycheck.
Ira-
ReplyDeleteA wonderful tribute to your mom.
Dr Bob