Does the CEO's pay really pay-off?

24 January 2013 12:35
Being the leader of a business requires a lot of hard work coupled with the right opportunity at the right time (this is also a definition of "luck").

An interesting article in Forbes magazine entitled The Number 1 Reason Leadership Development Fails corroborates First Train's philosophy that leaders should not be trained, rather they should be developed.  With this in mind, we can see that anyone can become a successful leader with the right guidance.

CEO remuneration has changed the Executive landscape in the past few decades.  In the 1960's an international survey found that 90% of CEO's were promoted from within the organisation; now that figure is 50%.

With more and more expectation that the "right person" in the Captain's chair will change the fortunes of a business, is this putting undue, and possible unrealistic, pressure on an individual?  Some would argue that the "executive compensation" justifies the expectation whilst others argue that it is the "executive compensation", coupled with the power that it brings that candidates are chasing.

A recent BBC radio programme Analysis entitled 
Just Deserts (21st January 2013), takes an in-depth look at whether the CEO's tail is currently wagging the Corporate dog or vise versa.

The Analysis report argues that CEO's are now paid so much, that they take unnecessary risks to prove their worth.  A former CEO uses the analogy of aquisitions, which take up an enormous amount of time, and are extremely costly but take long enough to fail for the CEO to have left the organisation.

On a personal note, I used to work for an organisation in the UK which has been operating in its current business model since 1929 and today is the 3rd largest private company in the UK with over 70,000 employees.  The Chairman of the organisation, always the highest paid employee, is not allowed to be paid more the 75 times that of the lowest paid (full-time-equivalent) worker. The John Lewis Partnership is unquestionably the most profitable retailer in the UK - and it is solely owned by its employees.

The debate about executive pay levels will no doubt continue.  However, one thing is clear - Leadership Development is critical in businesses that wish to stay ahead and maximise their future potential.

With First Train being experts in the field of Leadership Development, please feel free to contact us if we can be of any support to you and your future.
  

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