About Purpose is about your purpose.
Aim: Identify and articulate your purpose.
Arm: Shape yourself around your purpose.
Act: Achieve your purpose.
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CEO Compensation
Bob Ryan, About Purpose, Inc. ©2007
Home Depot made the news these last two months. Past CEO Nardelli left with a golden parachute of $210 million, and Blake was hired for $975,000. Oh, yes, there are performance incentives that could bump him up to as much as $8.9M. A story ran recently that Blake was turning down part of his salary and setting an example of cost cutting and sensible management. Only time will tell which CEO had the most impact on Home Depot.
So, what should a CEO make? Wrong question. The right questions go something like this: What combination of salary, benefits and perks most closely match the mission and vision of the company? What does the CEO and/or board want to communicate to the public? How does the compensation affect the future of the company with regard to image, investor expectations, employee morale, etc.?
Most CEOs I know run small organizations – businesses and social service agencies in the $Millions to $10s of Millions. And most would sacrifice their dominant hand to ensure the long term viability of their companies. I have many clients who have gone long periods without salaries, who have collateralized everything they own (along with many of their family members). Most of the CEO’s I know drive regular run-of-the-mill cars and live in unpretentious houses.
Most CEOs start out that way, but it seems that somewhere along the line, the stakes get higher. I have no doubt that many highly paid CEOs still care deeply about their companies, employees, customers and stockholders. I also hold no ill will against those who make millions of dollars. No, my beef can best be communicated with the words, “What were they thinking?” A mega church leader in the Twin Cities is under scrutiny for allegedly misusing church funds to increase his wealth. Apparently, some big ticket items like airplane and vacation home were purchased with loans from the non-profit’s money and then leased back to the non-profit to make the payments. I don’t know if it’s true or not, but I do have to ask of the board and CEO, “What were they thinking?” Can you spell “appearances?”
Before you set your own salary and benefits, think through all the ramifications. Not only the legal and tax issues (which may have been forgotten in the above example), but the intangibles, as well. Everything you do as CEO sends a message to the public. Your actions and your words communicate what your true values are. Ask yourself what you are communicating and then try to picture it in words right after your mission, vision and values statement. Is that really what you want to do? Does it establish a level of confidence in your investors? Does it convey a sense of shared risk and commitment? Ask some uninvolved, wise people what they think your compensation proposal communicates.
(A related aside for CEO/owners. I still have some CEO clients who are upset if their top salesperson makes more than they do. Get over it. The value that is accruing to the eventual sale of your company will more than make up for it. And be honest, it’s just pride talking anyway. Keep your focus on what is effective for the running of the company.)