Maybe this should have been posted on May 1. But nevertheless: At some point in the not too distant future, my personal feeling is that I think we need to have a discussion about CEO compensation in corporates and what good governance in relation to that really is.
Not because people shouldn’t be paid what they are worth, but because there is a discussion to be had about whether they are worth what they are paid. Fair and square.
But wait! Isn’t compensation for the CEO a matter for the board? Yes, it is. But judging from just a few examples maybe its time to just acknowledge that the boards might need some help in staying the best course.
Let me give you three examples:
One CEO proudly steps up and says that he has been spending quite a lot of time getting involved and trying to understand the digitalization efforts of the company, as it is important to the future of the company.
Ok?! You would think it was part of the job and not something extraordinary to be selectively proud about.
Another CEO claims that running a company as a CEO is like being in the old veteran cars in the Tivoli gardens; the tracks have already been laid out in front of you, and while you might think that you’re in the drivers seat, the car really runs itself, i.e. it is all handled by the organization.
Ok, so the reason you’re compensated 50x compared to regular employees is…?
Finally, a former CEO does an opinion piece about the need to reduce the gap of inequality between older and younger generations. Not only does he present old arguments as new (and perhaps even his own). He also fails to offer one single example of what he and others like him are willing to personally sacrifice in order to reduce the gap and prevent future potential social unrest.
A bit ‘meh’, right?
As mentioned I am all for paying people what they are worth. But I am also keen on discussion if people at the very top are worth what they are paid. Especially as compensation packages skyrocket year after year while ordinary wage increases for regular employees can just about keep up with inflation.
Add to that that there is also a matter of simply securing credit where credit is due; if the CEO thinks (1) he has to make an effort to understand what’s going on in the company, he’s running, while (2) acknowledging that essentially the company runs itself anyway and (3) thus procrastinating writing opinion pieces with banal truths that are already out there, then maybe – just maybe – we should start realigning where we give credit.
And award compensation accordingly.
Furthermore, we need to be more willing to dissect CEO compensation packages and be able to understand and explain them. The less CEOs and boards are willing to explain them and the rationale behind, the more suspect it will risk end up looking to ordinary people.
NB: Just for good measure: I am neither a communist, marxist or socialist. I just believe in fairness basic on data and logic. I fully support CEOs who really are worth every cent of their compensation