American Psych(CE)O

The American CEO in his native habitat.

The American CEO in his native habitat.

What is up with being a CEO in the United States? While we have all seen the news regarding the obscenely paid CEOs of the big three US car manufacturers, the reality is that the the overpaid CEO is more the rule in the United States than the exception.

It would seem that original theory was that in order to keep the “skilled” CEO with the company, you had to offer some huge package. Lets not forget that these CEOs typically do not JUST make a huge pile of cash. In many cases, their corporations pay for their multi-million dollar homes, their very expensive cars and sometimes even buy their old homes from them if they have to relocate to take the CEO position they are being offered.

Now I do not  begrudge a CEO making a huge pile of cash, IF they have managed to do their job well. The problem I have is that CEOs tend to make staggering salaries, even if they drive their companies into the ground head first.

It would seem like the right way to compensate CEOs is to pay them some decent amount as a salary. Perhaps we use the CEO of Toyota as a guide here and say they make a base pay of $1 Million. However, they can make above and beyond that amount based on the success of the company. If the company does not do well, they don’t make any extra.

There are far too many examples of CEOs that managed to get paid huge sums of money for literally destroying the company they were leading. Instead of giving you second hand examples, let me just do a quick run down of situations I was personally involved in. The first example is from my time at a company called Radius. Way back in the first half of the 1990’s, Radius was making monitors and was also making video editing software, etc. I happened to be working there in engineering. The leadership planning there was horrible. I was there to witness the stock drop below $1 a share. You could clearly tie the failure to the moronic guidance of the companies CEO. He had several projects that were his “babies” (IE: A patently stupid idea called “skylab” and a Mac clone that was stupidly executed – it got the nickname “The Anchor”) and no matter how much nearly all of us told him he was off his nut, he kept us on course into the abyss. So you might think that this guy would end up on the street. Nope. Radius ended up paying him his huge salary, paid for his brand new Jaguar and also forgave the loan on his house! All this while the company is having to downsize headcount and move into smaller facilities to make ends meet.

Radius was finally able to kiss that loser good-bye. Which brings me to my next head scratcher. You might think that after a CEO has a proven track record of completely screwing an otherwise healthy company,that they would have no hope of ever being a CEO again. You would be completely wrong. For some reason, once someone makes it to VP level or higher, they seem to always be able to find a new job at some company at the same level or higher.

Think back to folks like John Sculley who was the CEO at Apple Computer for a while. That guy oversaw some of the stupidest moves EVER at Apple. He was the guy behind the decision to take the cheap road in manufacturing by imitating the cheap PC makers and also the idea of creating so many different types of Macs, nobody knew what the hell to buy. Does anyone remember the Performa line? Trust me, I wish I could forget them!  At the time he was calling the shots, I was in the Higher Education group as a Systems Engineer РI was the technical guy that made all the sales peoples lies come true. I met Sculley twice while there. One time was at the Nashville Apple sales conference and after that, I feared for the company.

Then came Michael Spindler. This was a time of apathy and mis-managed opportunities (can you say Newton).

Then there was Gil Amelio. Despite bringing Apple stock to a 12 year low, Amelio still got his huge paycheck, money for his private jet and some say he got Apple to pay for his multi-million dollar home in Los Altos hills. Just another example of a CEO being rewarded for failure.

The point here is that boards of directors need to pull their heads out. They are the ones that allow this idiotic system to stay around. Perhaps they like doing things this way so that when one of them gets to the point where they might be CEO, they get the same deal. Sort of a way to protect what they hope to get in the future. If that is the case, then the stock holders need to be given a whole lot more power to deal with these morons. The vast majority of a CEOs ability to walk away with huge sums of money should rely entirely on their ability to actually do their job well. What’s more, once a CEO has failed dismally, that should not be a free ride into the next CEO position.

We need to return to the idea of a CEO actually having a vested interest in the success of their company.

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