Article: Rewarding failure at the top

Posted Thursday, January 6th, 2011. Filed Under Corporate - Tips/Tools Blog

This article was posted in the National Post in the last few days (January 4th or 5th, 2011) and was written by John Moore, host of Moore in the Morning on NewsTalk 1010 AM Toronto.

What I found so interesting is how we have put CEOs on a pedestal for so long that some, in fact, have just become plain entitled. This is evident in their “golden parachute” packages that they set up for themselves with no consequence or accountability to their actual results. As the CEO, you are the top – the buck stops with you. Thus you need to be held accountable.

I have written a lot about corporate culture and what are you creating, are you walking your talk? CEOs that are not held accountable and are “rewarded” for their behaviour, regardless of it being “good” or “bad” can have a devastating impact on the morale of the people of the company as well as the overall corporate culture.

In the article it states that average working Canadian earns $43,000 a year. The average for the top 100 CEOs in Canada is 155 times that. In the U.S. the ratio of the highest-paid to the lowliest employee in a company was 24-to-1 in 1965 and by 2000 the ratio was 300-to-one. The average working man is called selfish for expecting cost-of-living increases. Meanwhile, executives are increasing their pay by rates that are astronomical.

The author states, “Precisely what have CEOs done in this time to earn such a massive increase in compensation?” He gives some examples of CEOs that were not very “successful” in their terms yet because of their exit packages did very well:
* AIG CEO Martin Sullivan was sacked following a cumulative two-quarter loss of $13.1 billion, he was given a cheque for $68-million;
*Hewlett Packard’s CEO Carly Fiorina was ranked “as one of the worst American CEOs of all time” by Conde Nast Portfolio and earned a $20-million severance in exchange for halving the company’s stock value. Her successor Mark Hurd froze employees salaries in 2008 but took home $34-million in salary and benefits for himself.

These are not entrepreneurs, venture capitalists or private company owners. They are nothing more than high ranking employees.

Saying all that, there are CEOs that do stand at the forefront of their companies, do consider their employees and are worthy of earning what they earn. There are CEOs that find this “pigs-at-the-trough ethos” just as sickening (the author writes). In a 2009 column for the Harvard Business Review, Whole Foods CEO John Mackey decried executive overindulgence. “Because of the yawning gap between the leaders and the led,” he wrote, ” employee morale is suffering, talented performers’ loyalty is evaporating and strategy and execution is suffering”. The ratio of highest to lowest income earners at Whole Foods has been limited for three decades, and in that time, Mackey points out, the company “has never lost to a competitor a top executive that we wanted to keep.”

This is some food for thought as you enter 2011. This year is about truth and authenticity. All parties can benefit when you are in alignment with your mission and vision statement and all employees of the team, from the lowest on the totem pole to the CEO, work together to bring forward the mission and vision to their customers! Especially when the mission and vision is consumer oriented.

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