October 24, 2010
I have worked in industry and would like to relate my observations on CEOs. The people who start a company seem to understand that they have various groups who they must provide for. They have first the customers who they are providing a product for. Next they have their employees whose innovation and hard work are making the product possible. Next, are the investors or stockholders who provide the financing. All three groups are necessary and need to be provided for.
The CEOs who come after the people who have started a company can be of various natures. There are those who understand the three groups who need to be provided for and then especially in this era, there are those who more resemble looters of companies than builders of companies. They will institute mergers that ultimately destroy shareholder value and cost jobs but for which the CEOs are rewarded. They will spin off profitable divisions that ultimately damage the remaining company but the CEOs are rewarded for short term profits.
They will take credit for company growth during a good economy but blame the economy for bad performance during a down economy. The pay difference between the highest and the lowest paid employee is way beyond the contribution of these individuals. A CEO at a publicly traded company is in a position of trust. He is being highly rewarded beyond that of most employees of the corporation. When he has lost that trust, the process of removing him should be designed to be legally easy and shareholders should be required to approve any exit package beyond what an average employee would receive. The CEO should not be rewarded for leaving. Shareholders should be able to approve pay packages for CEOs until the ratios between lowest and highest paid salaries fall in line with earlier history.
People will argue that we will lose good talent. I argue that we need more CEO turnover. There always are other people at a company who are bright and have new ideas to try. Lets give them a chance. Encouraging people to change companies helps spread ideas and encourages innovation.
Shareholders need to regain guidance of companies from corporate leadership who have failed us. The loss of jobs and shareholder value due to corporate malfeasance is quite simply a slow destruction of America.