Excessive CEO Pay Disrespects Employees
This isn’t exactly “news” or at least anything new. Excerpt from the article:
“CEO pay isn’t set by markets, Finlay said in an e-mail interview. Instead, it is ‘determined by a small clique of like-minded directors, most of whom are themselves past and current CEOs with a vested interest in perpetuating a failed, but to them, remarkably generous, system.’
Billionaire investor Warren Buffett, the world’s second richest man after Microsoft Corp. founder Bill Gates, doesn’t go quite that far. But he did write in his annual letter to Berkshire Hathaway shareholders letter last year that ‘too often, executive compensation in the U.S. is ridiculously out of line with performance.'”
Toyota’s CEO, Hiroshi Okuda, made $903,000 in 2004, according to the linked list. Rather than jumping from company to company,
Hiroshi Okuda joined Toyota in 1955, at about the time of the company’s entrance to the United States market (source).
Another funny tidbit from the independent “Toyoland” website:
It is worth noting the martial arts experience of the two top Toyota leaders. Martial arts require discipline, patience, and study; American leaders tend to be lawyers and accountants with experience in obfuscation and penny-watching.
More on this topic from AutoWeek:
“U.S. CEOs’ income is 550 times greater than the average employee’s,” says Abegglen. Citing figures from compensation consultants Tower Perrin, he says that in Japan, “the multiple is about 10 or 11 – almost identical to Germany.”
“Compensation is distributed within the community, and no one person is given room to be so overly compensated,” he says.
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How can employees at Fortune 500 companies respect their leaders when they look like pigs at the corporate trough? The leaders aren’t showing respect for their employees. That’s where the cycle starts. No wonder so many employees are cynical and start looking out for themselves instead of doing what’s right for the company. They’re only following the example that’s set from up top.
What do you think? I’ll re-iterate the point that executive pay is more of a clique and cabal than true capitalism. Even athletes and actors have more of a free-market system. Athletes even work under salary caps, the same thing doesn’t apply in the executive suite apparently.
Lean and the Toyota Production System teach us to have “respect for people.” I guess some of these companies get so large that the executives can’t even relate to the employees anymore, or vice versa. That can’t be good for business.
Update: Not manufacturing, but check out this story about Whole Foods… seems to represent “respect for people” much better, I think.’
Update: Here’s an article about how salaries are just a small part of executive compensation, but highlighting some executives, such as the Google founders, who take a $1 paycheck to “promote an egalitarian culture.” Yes, the Google guys are so rich that they don’t need a paycheck, but they STARTED the company and had an entrepreneurial spark that the market rewarded. This is far different than an executive, like former Home Depot CEO Bob Nardelli, who stepped in to “manage” an already successful company.