I am disgusted by the lack of ethical and moral fiber of CEO’s (along with their cronies and apologists) in the USA. This lack comes out in many ways (see all the scandals at the too-big-to-fail banks etc.) but the problem I am upset about now is the increasingly commonplace kleptocrat behavior.
CEOs, and their cronies, were well paid decades ago. As their greed about their pay got to be unethical Peter Drucker started to speak out against their ethical failures. As those abuses became more extreme he increased his objections.
What Peter Drucker railed against was minor compared to the ethical meltdowns we allow in those serving in executive positions today.
Across the Standard & Poor’s 500 Index of companies, the average multiple of CEO compensation to that of rank-and-file workers is 204, up 20 percent since 2009
The average ratio for the S&P 500 companies is up from 170 in 2009, when the financial crisis reduced many compensation packages. Estimates by academics and trade-union groups put the number at 20-to-1 in the 1950s, rising to 42-to-1 in 1980 and 120-to-1 by 2000.
These CEOs act like kleptocrat dictators, taking what they can and challenging anyone to do anything about it. As with the kleptocrats they surround themselves with apologists and spread around the looting (from corporate treasuries for the CEO and the countries for the dictators) to those that support their kleptocrat ways.
Extremely Excessive Executive pay is so critical I classify it as a New Deadly Disease. I have discussed the problems created by allowing such morally and ethically bankrupt people in leadership positions: CEO’s Taking What They Don’t Deserve (2011) – CEOs Plundering Corporate Coffers (2008) – Tilting at Ludicrous CEO Pay (2007). In 2005 I spelled out some of the problems we face when we have kleptocrats running our companies:
The excesses are so great now they will either force companies to:
- take huge risks to justify such pay and then go bankrupt when such risks fail (and some will succeed making it appear, to some, that the pay was deserved rather than just the random chance of taking a large risk and getting lucky)
- make it impossible to compete with companies that don’t allow such excesses and slowly go out of business to those companies that don’t act so irresponsibly
- hope that competitors adopt your bad practice of excessive pay (this does have potential as most people are corrupted by power, even across cultural boundaries). However, my expectation is the competitive forces of capitalism going forward are going to make such a hope unrealistic. People will see the opportunity provided by such poor management and compete with them.
As long as the pay packages were merely large, and didn’t effect the ability of a company to prosper that could continue (slicing up the benefits between the stakeholders is not an exact science). The excesses recently have become so obscene as to become unsustainable.
Too often, executive compensation in the U.S. is ridiculously out of line with performance. That won’t change, moreover, because the deck is stacked against investors when it comes to the CEO’s pay. The upshot is that a mediocre-or-worse CEO – aided by his handpicked VP of human relations and a consultant from the ever-accommodating firm of Ratchet, Ratchet and Bingo – all too often receives gobs of money from an ill-designed compensation arrangement.
We can’t allow our system to be as corrupted by the kleptocrats and their apologists as it is today. They are acting worse than the robber barons did in the age of “amoral” business practices. As a society we put aside the foolish notion that ethics and morality were somehow not part of business. The current kleptocrat crowd wants society to forget such notions (supported by their mindless talking heads apologists).
If someone is not interested in the opportunity and responsibility to lead your organization for a reasonable pay chose someone else. There are a couple of people that maybe are worth it even if they have the attitude that they deserve to take a kleptocrat share of the gains and let others take the rest but that is rare. Most of the time the few people that are worth kleptocrat pay are not interested in in (Warren Buffett, Jeff Bezos, Craig Jelinek [Costco CEO], …).
The pay packages most CEO’s take from the corporate treasuries today by themselves prevent respect for people. They either know they are taking what they don’t deserve out of others pockets which shows no respect. Or they believe they are personally responsible for a huge percentage of the profits generated by the business and all the others involved should be happy to have them take such a huge share which is disrespectful when a CEO does it or when a kleptocrat dictator does it to their country.
Your company will be much better off choosing executives that believe in the company and believe in their co-workers and believe in their customers and want a pay package that is a small fraction of what others are taking. The kleptocrats and their cronies try to spread fear that you have no hope of finding an honorable and competent person to lead your company. That just is false. There are plenty of people who would be competent to do so and don’t demand to raid the corporate treasury to build themselves castles.
Sure lots of those who are capable won’t want the opportunity to lead a company that isn’t interested in kleptocrat takings by the executives. That is fine. Chose from those who are left. You will have a more honorable team with the hope that respect for people could take hold (or if it exists continue) in organization. An organization based in respect for people (and the other aspects of the Deming management system) is going to serve future prosperity of the company much more than a kleptocrat CEO.
If someone thinks leading your company is not worth doing without kleptocrat pay, let them work for your competitor. You will gain a better employee and a competitor that is saddled with a narcissistic leader. I want a CEO that is paid well and seeks their reward not by taking from the corporate treasury but by providing great jobs, customer happiness and an improved society.
Related: Obscene CEO Pay (2006) – Drucker became one of America’s leading critics of soaring executive pay – Massively Unjust Executive Compensation Damages Companies and Investments – No Excessive Senior Executive Pay at Toyota (2007)