This is a posting I started weeks back when this was hot in the news; yet, the Thain story continues with his lavish personal indulgences disclosed amidst the categorically related uproar over grossly lavish Executive pay–and more than this, INTENTIONALLY irresponsible financial decision making while stakeholders sweat the consequences. There’s a big difference between intentional and accidental. Today I’m focusing on the intentional.
While we’re on the subject of the responsibility of leadership and Executive pay, let me share a few stats. One of the contrasts that can be seen with wildly excessive Executive pay is the growth of the average CEO’s salary versus that of the average paid worker in his/her organization.
In 1980 the multiple was at a very low (historically) 42. This means that the CEO received 42 times the average salary of his/her employees. So let’s say the average worker made $40,000, using that multiple of 42 it would equate to that particular CEO’s pay of nearly $1.7 million dollars a year.
Over the past few decades, this has crept upward.
To a 100 multiple.
Then 150x.
Later 250x.
Even 350x.
And then some.
This ratio peaked as high as 525x during the dot-com bubble, but has hovered in the 300-400x range even in the last few years. In 2005 the multiple was 411x. Yes, the average CEO pay was a multiple of 411 TIMES HIGHER than that of the average employee.
So let’s take our same hypothetical example. Let’s say the average worker salary in those companies was $40,000, at a multiple of 411 that would equate to: over 16 million dollars.
(As an aside, as a Company Univera doesn’t disclose revenues and salaries/etc., however, I am certain that our ratio is currently just a fraction of what the ratio was EVEN BACK during the historic lows in 1980.)
There’s something wrong with this picture; it’s not that performers and the best of the best shouldn’t be paid competitively and extremely well for their efforts, but at the same time–when is enough enough? And at what cost to the shareholders, the employees, and some semblance of sanity and inherent fairness?
Back to the subject. Every great Exec does and will make accidental decisions that have adverse consequences. It’s the ones that do it intentionally and dramatically, with hubris and greed, that reign a far different judgment than those who simply made a mistake.
I generally try to focus on the happy-feel-good stories in my blog, but the lessons learned don’t always come from just these. Sometimes it’s learning and observing through the mistakes of others.
The aburdity of Thain’s hubris is summed up by one of his more recent quotes (not highlighted in the story below) to explain away his lavish office purchases which exceeded 100k worth of a piece of wood furniture and a rug, by saying these were purchased over a year ago “in a different economic environment.”
Given that over half the world lives on less than $3 per day, the only thing that competes with the audacity of his lavish six figure purchase is the audacity of his justification.
I don’t know Thain from Adam, other than what I’ve read. So I don’t offer this as a vilification of the man or person, though I am giving him a little bit of heck for these particular decisions and justifications. To judge him as a person isn’t my place or desire. And he might be a really decent guy who just made some some stupid decisions (incidentally, the lavish furniture was just a small glimpse into some poor decision-making, which included doling out a reported 4 billion in bonuses to his management team during a year where the firm LOST 27 billion dollars.) There’s more to this story, but moving on.
So, anyways, as I was saying…Some really really stupid decisions. But that’s part of the problem when greed grabs hold. It turns good people into lasers for the WIFM question–What’s In it For Me? It’s a normal question to ask, but once this question blatantly CONSUMES the questioner, it can be a dangerous path. Because justification will follow everywhere else. There will ALWAYS be a way to justify a decision once greed grabs hold. In fact, that’s what makes it so dangerous–because the greed will absolutely blind the inflicted with a rationalization of right and wrong, even when it flies in the face of logic.
Reflecting on Thain’s Reversal of Fortune
His Wall Street pedigree seems impeccable. A top job at Goldman Sachs. The chief of the New York Stock Exchange. Finally, the reins of the stock market’s “thundering herd,” Merrill Lynch.
But in less than 15 minutes on Thursday, the charmed career of John A. Thain was derailed, The New York Times’s Julie Creswell and Louise Story write.
Three weeks after his foundering brokerage firm was sold to Bank of America for $50 billion in stock, Mr. Thain was pushed out by the bank’s chief executive, Kenneth D. Lewis, who is struggling to contain the damage from his bank’s daring gamble on Merrill Lynch.
Click here to read the entire story.
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This is a posting I started weeks back when this was hot in the news; yet, the Thain story continues with his lavish personal indulgences disclosed amidst the categorically related uproar over grossly lavish Executive pay–and more than this, INTENTIONALLY irresponsible financial decision making while stakeholders sweat the consequences. There’s a big difference between intentional and accidental. Today I’m focusing on the intentional.
