Compensation levels for CEO’s and C-suite execs took off like a rocket starting in the 1980’s. It was caused by the dual whammy of Milton Friedman’s “maximize shareholder value” maxim and the advent of the “leveraged buyout” focus from private equity firms.
I should know because I participated in those phenomena as a CEO. The stock options I was granted during those years far exceeded the norms of option grants in prior decades as boards tried to “align” management’s financial interests with those of shareholders.
There is nothing inherently wrong in private equity, stock options, in divesting unproductive assets, or delayering bloated companies. Those undertakings are a healthy part of marketplace adjustments, as long as they are done ethically and respectfully.
But the C-suite financial gains that boards approved to, supposedly, attract the best of the best became obscene. The result is pernicious: A huge decline in trust of CEOs and corporations.
Here’s my plea to boards. Your job is not to find that one-in-a-million, genius CEO. With the right values, culture, and focus on execution, there are many highly capable people who can be the CEO, and many highly capable people who can form that outstanding leadership team you need. Great leadership is a group performance, not a solo act.
If you want to rebuild stakeholder trust, get off the mega-bucks merry-go-round and adjust your compensation and perquisite levels to reasonable ranges.
Bob Vanourek is the former CEO of five firms from a start-up to a billion dollar NY stock exchange turnaround. He is the co-author of the award-winning book Triple Crown Leadership: Building Excellent, Ethical, and Enduring Organizations. He is one of Trust Across America’s Top 100 Thought Leaders in Trustworthy Business Behavior. www.triplecrownleadership.com
This article is one of several Bob Vanourek wrote forTrust Inc., A Guide for Boards and C-Suites, published by Next Decade, Inc. 2014 and edited by Barbara Brooks Kimmel, Executive Director, Trust Across America – Trust Around the World.