This connects to several posts on what CEOs should be paid and why ? But more important is who will decide what they are paid ? That is the tricky part.
CEOs are usually employees. They are not business owners. By paying them a fortune, companies create an isolation layer between the CEO and the rest.
Places like the army have best practices which are good to follow. Firstly the cantonment commandant will never get 100 times or 1000 times of the average salary. For example in TCS it is 368 times. Secondly the commandant will live inside the cantonment – he is not going to shift to the swankiest condo in town and get photos of his dog and new condo printed in the papers to cause envy.
But talking of dogs, in one large Indian IT company, the third highest paid executive’s main job was walking his dog. The COO was the brother of the CEO and the third highest paid person was from the same village as the top two – some place called Mohanur in remote Tamil Nadu. Now how did this happen ? Is it that among 140 crore people there were only three people fit to run the country. Or was it a case of malafide intent.
When CEOs get paid too much, they look for loyal trusted groups to do three things – one is to do most of their work (so they can focus on boss management); second is to keep control of the organisation (lest someone better do better and grab their job) and third is to create an isolation shield between pain and people and themselves. This structure helps them to retain control, convince their bosses that they are solving daily crisis (even if those were invented by the trusted groups and are pure fiction). It also keeps inheritor owners scared and confused. They are convinced that the company cannot run without the group.
And the inheritor owner whose wealth is a function of share price is too scared to topple the apple cart.
Sounds familiar !!
The way out – sack the whole group in one swipe on the same day. And then bother about how the place will be run after that.
The key is to clean up overnight. Not a long painful process. Share market investors understand a clean up.
Nature tells us that the best way to grow a great forest is to eliminate the weeds first. A corporate is no different.
