The CEO of a major British Corporation faced a shareholder revolt recently regarding what the shareholders viewed as excessive executive compensation. The CEO of Aviva, Andrew Moss, has tendered his resignation as a result of the publicity surrounding a rare thumbs-down vote from shareholders.
Oh, and by the way, the Board of Directors handed him a check for 1.5 million pounds on his way out the door. Poor sod.
Does executive compensation really matter? If an executive makes $10 million (not that unusual these days) and leads an organization of 10,000 employees, that’s $1000 per employee. That’s a significant sum for some employees if that money had found its way into their pockets instead of the executive’s trust fund.
This assumes that money in one place takes money out of the other, which is a shaky bit of logic. The argument is made that paying $10 Million to a talented and dynamic executive results in more jobs, higher pay for employees, and higher stock value for shareholders. And sometimes it does.
But no one can determine the actual economic value a CEO brings to any company. The CEO is indeed of critical importance to the company, strategically, culturally, and financially. And honestly, I don’t hate or envy rich people—I really don’t. I just wonder what it does to trust in an organization when the people at the top are raking in such huge amounts, and when, as in the case of Aviva, that compensation seemed to have little to do with the company’s overall performance or value.
I was an executive in a Fortune 150 company. I was never close enough to the boardroom to get my hands on such lucrative compensation. But I was close enough to smell it. This company was led for years by a CEO I knew well. And I thought he was, well … pretty worthless. He was a sycophant of limited ability and poor people skills. The company did not perform well during his tenure.
When he was finally shown the door, (the term is usually “stepped down to spend more time with his family”) he was given $4 million in severance – after making many more millions in salary and bonuses during his time as CEO. When I resigned from the same company I was given a box to pack up my things. I’m still ticked off about his $4 million crony’s payoff.
Are top executives overpaid? I can’t say they all are, but many of them make off like bandits while creating little value for the guys sweeping the floors and staffing the phones. Good riddance, Andrew Moss, and a tip of the hat to the shareholders who called you out.