Pay Cuts for CEOs?
By Mark Swartz
Canadian Workplace Specialist
In recent weeks a scenario has unfolded that was unimaginable just a year ago. CEO’s of America’s top banks are having salary ceilings imposed if their company taps into government-supplied bailout funds. A shocking development given the $18 billion worth of bonuses handed out on Wall Street not long ago. But not so surprising given the banks’ collectively dismal performance in the past 12 months.
In Canada no such restrictions have yet to be imposed. Instead we are seeing some voluntary actions that may be part of a growing trend. For instance, in early February Royal Bank of Canada CEO Gordon Nixon announced he had made a “personal decision” to decline $4.9-million in compensation for 2008. “In light of the current state of the global markets and the challenge faced by so many in Canada and around the world, I feel this decision is right for both me and for the bank,” said Mr. Nixon. That same day, the CEO of BMO (Bank of Montreal), Bill Downe, also voluntarily forfeited $4.1-million in compensation.
It’s the Message That Counts
Obviously no one is rushing out to start a food drive for deprived CEO’s. These senior executives will still earn considerably more than a gaggle of bank tellers combined. However the message being sent is clear: in the face of economic uncertainty, we must all pitch in together and make some sacrifices here and there.
It’s a theme that ought to play well with the rank and file. People on the front lines are worried about their jobs and personal finances. If top management appears to be oblivious to this, and if the pay of executives is not seen to be tied to performance, it can not only demoralize regular employees but can, in the extreme, create the kinds of resentment that could ultimately lead to defections of good people, or even prompt the deliberate impairment of normal business operations.
This holds true whether we’re talking about a bank with 30,000 employees, a medium-sized manufacturer with 300 staff, or a small service firm with 30 people.
Executive Pay, Positive Results, and a Dash of Humility
Terrence Corcoran of the Financial Post has stated the following in an article he wrote in February 2008 about bankers’ compensation and the Wall Street bonus excesses:
That bonus and compensation payments should now decline seems logical enough, although a case can certainly be made that the need to keep good people still requires the payment of competitive salaries and bonuses. That would be especially true at the top levels, where the skills needed to manage through an economic crisis may even be greater than the skills needed to coast through a boom.
I certainly agree with Mr. Corcoran that the best talent should be rewarded accordingly. This should hold true from the most junior receptionist to the folks in the highest positions. And during this period of heightened worry for the many, a little show of humility from the leaders might generate a lot of goodwill among the led.
Mark Swartz, MBA, M.Ed., is the best selling author of "Get Wired, You're Hired!" He is a professional speaker and consultant on workplace issues at www.CareerActivist.com