The solution to CEO pay? Charge people to be CEO.
I just ran across an article by Mark Cuban about CEO pay and how stock and options have distorted it beyond all recognition. I go a step further and suggest … well, read for yourself.
In the startup world, we hire CEOs because we expect them to be passionately committed to the idea, to the industry, and to the company. We can’t afford to pay them millions and they realize that the stock is a risky bet.
The idea that we have to pay millions for a dedicated, committed CEO who takes the same risk as the shareholders and employees is hogwash. They’re STILL doing studies to justify linking CEO pay to performance. Get real, people: if the link is STILL unclear in an era of nine-digit salaries, then guess what? It’s not strong enough to justify anything. So let’s go for CEOs who don’t demand a multimillion dollar payout just to take the job.
There are only 4,000 chances in America to be the CEO of a public company. Just 4,000. That’s called “a scarce commodity.” Rather than paying CEOs *anything*, let them bid on the job. Only 4,000 people will ever get the chance to play in that arena, try things on that scale, and have that kind of impact. I want the people who are so committed to the job, company, and industry that they’d pay for the privilege. And let’s let them pay.
(And yes, there are some people in the F500 driven by non-monetary considerations. I’ve met and talked with two Fortune 500 CEOs extensively. Both had companies doing extraordinarily well. Both were so committed to and in love with the job that they told me the money was completely beside the point. “Where else could I learn this much, try this much, and have so much fun learning?” one said.)
What a novel idea! Given the limited number of CEO roles and the egos such roles attract, I would think there would be many candidates. But how to make the transition from highly paid to paying for the privilege? No large ego would want to be first. They would make the cover of “Business Week” for the wrong reason.
April 17th, 2008 at 10:22 pmInteresting concept. However, I disagree with Gary: I think the largest egos would want to be the first to do it, for bragging rights. It’d be intersting to see the dynamics once the novelty wears off.
It does bring to mind a few issues though:
- How do you make sure the CEO doesn’t get distracted by financial issues du to lack of income? Or are you saying that a CEO should be like a president/prime minister: independently wealthy? Note that in those cases, world leaders sometimes choose not to take their salary, but I’m not sure anyone ever paid to be the leader of a country.
- How to you keep the motivation going? Does the motivation remain the same without compensation?
There are studies that show that compensation is a good stimulant. Others show that it is a good deterrent. How do you balance the two?
It would be interesting to find some studies showing the link between job-related stress, motivation and incentives.
L
April 18th, 2008 at 10:17 amI look to Warren Buffet. His companies, totalling hundreds of billions in annual revenue, are all headed by CEOs who are independently wealthy and choose to remain at their job for love of the job. Buffett regularly points out that none of them have to show up and put in a stellar performance; they do it because they want to.
We’ve managed to convince ourselves that people only work for the money. That may be true if you flip burgers at Burger King, but anyone shooting for a CEO position who only cares about the money isn’t someone I want having that kind of control over the employees and communities where they operate.
I also suspect most CEOs (remember, I’m talking of large public companies, here) are already millionaires by the time they hit that level. If not, well then, they have to decide if they want the job enough to go into debt. I’d rather that system than the current system, which simply transfers millions from shareholders & employees to the CEO’s bank account.
Check out Buffett on how options, for instance, let CEOs enrich themselves without the company even having to maintain status quo! http://articles.wallstraits.net/articles/1372
April 18th, 2008 at 8:06 pmWhy not just give them the same pay as the lowest paid member of the company?
Then, because they’re getting the same pay and benefits as the lowest paid member of the company they’re more likely to extend better pay and better benefits to the whole workforce.
What think you?
April 19th, 2008 at 6:33 pmMoney is a status symbol, and I think that’s what CEOs care about most. They are already wealthy. If you force people to pay, they’ll just stay as VP or something.
I’m relatively certain that being a good CEO is difficult. So the fact that there are only 4,000 or so positions isn’t the whole story; how many qualified, driven, people are out there?
Rewarding a CEO with stock seems like a good idea, maybe you could work this idea in. If you forced a CEO to buy stock at market price over
April 20th, 2008 at 9:33 pmtheir first month or so, you’d have a CEO with a significant financial investment in the company. By giving them stock, you guarantee they’ll just sell it as soon as they can.
[...] No surprise why the shareholders are irate. Stever Robbins has an interesting alternative: “Charge people to be CEO”. Or at least ensure that they have the same priorities as the shareholders. - Greg Glockner, [...]
April 21st, 2008 at 6:41 pm