CEO pay is the most egregious example of any perceived double standards in today’s business world. The sheer numbers boggle the mind. Ten million dollars in salary, twenty million in bonuses, a hundred million or so in stock options… How can one person in an organization be worth that much money? Why would they even want that much? What could they possibly spend it on? When you throw in the perks and payoffs that go with the dollars, the sense of disproportion becomes surreal. Not just the money but also a private Lear jet, a five million dollar pied a terre, a dozen country club memberships, a two hundred acre summer home by the sea, laundry service, music lessons and pet grooming! Even more damaging, the information about such trappings of power seems to be released when the executive is under pressure over poor company performance. This confirms a general impression that Nero has been fiddling while Rome burns.
We are shocked and titillated with each new revelation. Several very public CEOs could be described as poster children for over-doing it. Take Dick Grasso, head of the New York Stock Exchange. On the one hand, Grasso was a true success story in the American mode. He started at the NYSE at an entry level position, working in the proverbial mail room, and climbed the ranks over the next thirty years until he reached the top position. From that leadership post, he oversaw the NYSE’s evolution through a period of tremendous technological change; he maintained public confidence in the capitalist shareholder system despite a wave of corporate accounting scandals and a sense of entrenched favoritism in the financial companies that create stock offerings; and he helped the organization literally survive the devastating terrorist attacks on the World Trade Center.
For all of these accomplishments and more, he was rewarded handsomely. When the extent of those rewards were revealed, he fell with a mighty thud.
The double standard taboo which got exposed in Grasso’s case was all the more electrifying because the NYSE is a non-profit organization. Although no one could ever imagine the beating heart of Wall Street functioning or even thinking like a non-profit in any ordinary sense, nevertheless, that word “non-profit” was repeated over and over in news reports discussing the “scandal.” It was as though Grasso, as leader of some charity like the United Way, had cooked the books and robbed donors blind at the expense of malnourished children in the third world!
The truth was somewhat different. Grasso’s compensation package was awarded to him by his board of directors. Yes, most of those board members had been appointed because of their support for and friendship with Grasso; but they also had impeccable credentials as leaders of the very institutions that Grasso was being paid to serve. To suggest that Grasso was caught with his hand in the cookie jar is a complete mischaracterization of what happened. Indeed, Grasso was operating completely within the boundaries of the rules by which he had played his entire life. But publicly, Grassohad broken a taboo.
Jack Welch, former CEO of GE, encountered a different aspect of the double standard taboo. Many would argue that Welch was the greatest CEO of the twentieth century. While he was overseeing GE’s phenomenal growth, no one complained about his compensation, nor called any aspect of it into question. During his messy divorce, however, details of his retirement package became public knowledge. In addition to a great deal more money than had been known about, Mr. Welch was also the beneficiary of a multi-million dollar Manhattan apartment and use of the corporate jet, among other surprises. Most shocking of all, Welch an extremely wealthy man, had his dry cleaning services covered, too.
To those already frothing about the excesses of double standards, this information was proof that even Saint Jack was corrupt. Why in Thomas Edison’s name should GE shareholders pay for Jack Welch’s dry cleaning when he no longer ran the company? In fact, Welch’s benefits were not out of line with what other CEO’s have typically received. More significant still, few of those other CEO’s have ever come close to producing the value that Welch created for shareholders. Indeed, the benefits of his leadership extended beyond GE, raising the bar for executive performance at companies everywhere. And yet, there was something about the idea of Jack Welch getting his dry cleaning expenses reimbursed which made people upset. Welch, unwittingly, had broken a taboo, and his luster was a touch less shiny as a result.
Anthony Smith is Co-Founder and a Managing Director of Leadership Research Institute and author of ESPN: The Company (Jossey-Bass, September 2009). He is also the author The Taboos of Leadership: 10 Secrets No One Will Tell You about Leaders and What They Really Think (Jossey-Bass, May 2007). This article originally appeared in different form in his book, The Taboos of Leadership.
