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CEO Pay As A Tool For Employee Disengagement Dr. Ken Siegel 04.22.08, 3:40 PM ET
Most of the CEOs of the Standard & Poor's companies just cashed in--again. In 2007, it was reported that median CEO pay was $15.7 million for the 50 largest of Standard & Poor's 500 companies. Plus, there were whopping pay packages, like the one received by Kenneth Chenault at American Express (nyse: AXP - news - people ) of $50.1 million. More startling, perhaps, is that Angelo Mozilo of troubled mortgage company Countrywide Financial (nyse: CFC - news - people ) made more than $200 million from 2001 to 2006. On the other hand, most employees of these enterprises are cutting costs and preserving funds as their buying power decreases in this inflationary period--with little or no advancement in real adjusted income. While many of these CEOs and their boards will say they are worth it, few if any are sending the right message--or even a decent message--to their troops. In fact, unlike Lee Iacocca, who took a $1 salary a generation ago to save Chrysler, most of these CEOs and boards are saying that they are preserving jobs, the economy at large and more. The righteousness of denial continues, unabated. While that may be so in some cases, the true reality is that top-level executives are living in an unconscionable fog. And when the fog lifts, the resentment of the underpaid, overworked employees will remain. The resentment harbored by these workers is deep and not forgotten. As soon as they can, they will leave. Boards and CEOs have to grapple with real issues. The issue of responsibly managing the company; the issue of ethical, competitive pay for executives; the issue of navigating global markets. So, how does a company justify a seven- or eight-figure salary for its chief executive, yet keep employee engagement high? After all, corporations worldwide are scoring themselves on employee engagement--yet with the published report of one single salary, they can produce deep employee disengagement and pervasive employee cynicism and hostility. There really is no way to defend a huge salary to the average worker. It can be defended on Wall Street, of course, or by the executive search industry, which gets paid on a percentage of an executives total pay package. But the average employee can see this as a slap in the face (i.e., while I struggle, you, the CEO, reap the rewards). It can be almost a caste system in their eyes. So, the more a CEO earns, the more he or she may need to explain--or defend--his or her high salary. The best explanation is by actively leading the company, supporting the employees and sharing in the pain as well as the gain. Communicating the real issues facing the company and digging into the ranks, down to the lowest level, to find solutions to problems is a start; then, recognizing great work by those in the field and on the assembly line to solve problems--and financially rewarding those people, as well as one's self. To do this takes communication, and it takes confronting the real problems facing the company to all. It takes creating task forces, including management, workers and others, to address problems. In essence, it takes turning the tables, and letting everyone know that the CEO gets paid "the big bucks" for a reason: to support the company, its jobs, its people--ultimately its shareholders; and that they may suffer a similar fate, together, in the event of failure. I spend most of my time coaching the worlds most powerful executives in understanding the limits of their power, but more importantly the responsibility of their position. They are really the servants of the corporation, ensuring the company is authentically led, that the employees will follow, and at times, that they will also take the lead. To have a high salary and pull it off without resentment within the company--especially when the business is performing poorly--takes courage, transparency, and, above all, humility. All those human qualities will engage the troops--yet they are too rarely demonstrated, and even more infrequently observed. Dr. Ken Siegel, a global managerial psychologist, is president of The Impact Group, a group of psychologists who consult for managers and leading global companies. More On This Topic
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