As the owner of a home-based business, I guess I could say that I am the Chief Executive Officer. I am involved with a direct selling income opportunity that has potential for unlimited income and residual income…that’s “potential.” What salary would I give myself? And, if business were down, would I ask the government for a bailout? Well, no, because my business has no employees. There is no one to whom I would give a pink slip. If my business is down it is me that receives reduced income. For me, as CEO of my business, the “buck” literally stops at my desk and is dependent upon my efforts.
I have always been of the opinion that the Chief Executive Officer of a company and the chairman of the board, the entire board for that matter, ought to be the vision makers and vision holders. Leadership means guiding. As CEO – this person in this position should be guiding his company [to use maritime metaphors] through the seas, watching for squalls, finding safe harbors and looking for prosperous landfalls in which to do commerce. Leadership positions are special. They are meant to be the light which illuminates the company so that management and the workforce can make the vision reality.
But I’m not seeing this in CEOs. The huge compensations they are paid seem to be insulting in the face of the layoffs occuring through the country. Good grief, the chief executive officer of the United States – an entire country, not a company- doesn’t earn anything near the typical marketplace CEO.
There is an interesting viewpoint article online at businessweek.com by Edward E. Lawler III about CEOs and their compensation. Professor Lawler’s article talks about the complexity of companies’ boards of directors setting the compensation for CEOs and the [to me] troubling fact that in many cases, the chairman of a given board of directors is also that company’s CEO…just how might that work?
- Here’s a picture: I’m the CEO of Good Cereal Company, and I’m also the chairman of its board. I also handpicked 45% of the board. When it comes to drafting my compensation package I vote for giving me $2 million a year in salary with a $25 million bonus. Now, most of the employees in my company earn hourly wages, only one manager level employee earns in excess of $100,000/year…where in this do I – as CEO – possibly merit such a huge annual salary and bonus?
I read an argument recently about executive compensation packages that said it was practice to offer such huge amounts in order to attract and keep talent. Here’s the hard question: if this proposition were true, then why would the big three automakers in the United States be needing bailouts? If the CEOs of these companies were as talented as apparently they need to be, then why didn’t they:
- attract other talented people to their companies who could: (1) forecast the economy; (2) see industry trends and act on them before disaster struck?
How can the CEO of a company accept a salary that is in the millions with an annual bonus in the millions and still hand out pink slips?