In the next few days, the Treasury Dept. is expected to deliver a strong message about the true meaning of pay for performance when it announces drastic executive compensation reductions for the top brass of bailed-out companies. And it's about time. For years we've witnessed supposed leaders guide their companies to uncharted depths while not taking real responsibility for their decisions where it matters most—in their own pockets. Meanwhile some corporate boards have stood idly, not holding CEOs accountable. This behavior is an insult to the privilege of leadership that other corporate executives take seriously.
As we've watched the slow recovery of the market over the past several weeks, most investors remain understandably cautious, even with the Dow Jones industrial average breaking the 10,000 mark. One reason for the lack of celebration may be that events of the past 24 months have revealed just how much has been forgotten about the responsibility of leadership. Too many C-suite occupants seem to overlook that ownership is just as important—if not more so—when times are bad as when profits are soaring.
At the risk of being called a socialist, which seems to be a popular maligning label these days, let me remind readers that the government funds that have bailed out the seven failing companies affected by the Fed action is our money—hard-earned taxpayer dollars. We have a right to expect to get value for our money, which means paying for responsible leadership. Yes, we are required to pay. So, where can Washington turn to for good ideas?
A Better Mousetrap There are reasonable executive compensation programs in practice that can serve as a model for a better mousetrap. Take a look at Whole Foods (WFMI) as one example. Its senior executives' pay is limited to no more than 19 times the average worker wage, and it's built a transparent performance model where each employee has access to compensation data for every other colleague. Teams understand their own responsibilities and those of other teams, and performance data is shared throughout the organization. This is accountability in action.
Are Whole Foods' leaders just smarter than everyone else? Perhaps. It is more likely that they are driven by a leadership belief system that welcomes responsibility along with reward. In the decades that I've worked with leaders, some fundamental tenets have guided the behaviors of the best among them. These are deeply held operating principles that it might serve us well to revisit as we move forward in this still-challenging economy:
Leaders share in the success and own the failures
Leaders are driven by purpose and passion rather than power and fear
Leaders inspire rather than promote cynicism
They focus more on others than they do on themselves
Leaders grow other leaders rather than demand followers
Leaders are pure in their motives and operate from a place of highest good when they interact with others
They care as much about the success of others as they do about their own success
They view leadership as a privilege rather than an entitlement
The behaviors of a relatively small number of senior executives in very large and influential companies have created an environment where all leaders will now be challenged with rebuilding trust among their own employees, among shareholders, and with the public. Without trust, their businesses will suffer— or worse, decline to a level of insignificance. Embracing these principles and dousing the passion for greed might provide a first step to achieving that important goal.