Taking What You Don’t Deserve, CEO Style

The excesses to which CEO’s and their board buddies go to in taking from corporate treasuries what they don’t deserve continues to amaze me. The level to which the bad behavior is accepted is apparent in the lack of progress at dealing with those that are taking what they have no moral right to. As shouldn’t have to be explained (but maybe does) leadership isn’t about avoiding being indicted. The levels to which these people take from the organization they are suppose to be leading is a very sad commentary on our leaders. They act as though the corporation exists to enrich them, and their friends, personally: and all the other stakeholders are just leeches on the system.

CEO’s deserve to be paid well. As they were in 1970. As their abuses (with the support of subservient boards) became greater and greater the outrage increased. Peter Drucker moved from defending highly paid CEOs (say 20 or even 30 times the median employee pay) to expressing dismay at the massively excessive pay packages in the 1990s (which were much lower than that taken by the current crop of self important leeches).

Taking such excessive amounts from the corporate treasury is innately dis-respectful to all other employees (though usually they through large amounts of cash at those they have to see often which bring them into the camp of those taking instead of the masses being taken from). Whatever nice words they use to try and give an illusion that they respect those they work with (or their stockholders, suppliers, customers, communities…) doesn’t change their disrespectful actions.

Executive pay from Fortune, annual earnings from Google Finance, employee totals from Yahoo Finance. * Quest was merged into CenturyTel and I can’t find Quest employee data.

This problem is far worse in the USA than anywhere else. Some CEO’s have become jealous and urged that they be allowed to take more so they can not feel so sad about how much less they make. And so companies from other countries are moving in the wrong direction. The USA continues to move so quickly away from any sense of propriety however that they seem to be gaining on the rest of the world for how badly we can do in this area. There are of course, companies in the USA that don’t believe in letting the CEO treat themselves to whatever they want. Costco is a great example of this. That CEO respects his fellow employees and customers. We need more outrage at those CEOs that refuse to lead and instead just seek to take whatever loot they can before they leave.

Related: Another Year of CEO’s Taking Hugely Excessive Pay (2007) – CEO’s Castles and Company Performance – Honda’s top 36 employees received $13 million total (2006)

There isn’t an exact level of self serving behavior that bring this into play but 40 times median pay is an awful lot. 100 times I don’t think can be justified (yes I do think I would pay that for Warren Buffett or Steve Jobs but that group of people is extremely limited – and mostly those people are not focused on lining their pocket with pay from the company). Also take United Health Group, for example, they earned $53,000 per employee, taking over 100 times that seems like a lot. Playing games by contracting for employees that are paid less (thus raising median salary of employees obviously is not showing respect for the company or employees).

The excessive pay taken by the CEOs also vastly inflate the other senior executive salaries. The other executives are a big part of the overpaid executives problem.

I don’t think you are best off with egomaniacs that are most concerned with how much they can take from the value created by the company. I am perfectly happy to let those people go elsewhere. I want leaders that are interested in providing value to the stakeholders of the company (and if they think they are due 4% of the total value the company provides they can go find some other organization to leech off). I think 1% is a massively huge amount for a CEO to take of yearly profits (and I couldn’t see accepting that without a great deal of justification for why that is in the best interest of the corporation over the long term).

Where exactly it becomes abusive is not at some fixed number, many variables come into play, in my opinion: 1% could easily be abusive (maybe it is possible not to be abusive at that level – I am not sure). For small companies (with under 1,000 employees, say) I think it is easy to see perfectly reasonable pay above that level.