Why are executives surprised by negative reactions to their own double standards? Because the double standard is very standard to them.
CEO’s are treated differently in many different ways. Unlike ordinary mortals, they do not wait in lines or worry about petty rules that must be strictly adhered to by ordinary employees. When budgets are tight, don’t expect the CEO to fly coach even though everyone else must. In a non-smoking office, don’t be surprised to see the CEO enjoying a cigarette during a meeting.
The people who run large companies today make millions of dollars and receive special treatment, but so do others in our society. Julia Roberts, the film actress, has said publicly that she thinks it’s ludicrous that she gets paid twenty million dollars to star in a new Hollywood picture. But, she has also noted that the movies in which she is the star gross hundreds of millions of dollars, employ thousands of workers, and generate revenue for very large, powerful companies. Why shouldn’t she be a primary benefactor of that wealth generation? In addition, she is also beset by the never-ceasing glare of media attention, and has virtually no private life within the public realm. Is it any wonder that she expects door-to-door limousine service, a personal trainer to meet her at her hotel every morning, and friends, hangers-on and employees to take care of her smallest needs. For every Julia Roberts that succeeds, there are thousands of actresses whose efforts fall short. It’s an equation which should mean something in determining value. Indeed, we reward our star professional athletes in much the same way, rarely if ever decrying their special treatment. Think of Tiger Woods, who makes eighty million dollars a year in endorsements, whether he picks up a golf club or not. We don’t think that he should give back those big bonuses or stop riding in those private jets just because he doesn’t win back-to-back majors one season. We think it’s perfectly reasonable given the extent of everything he has accomplished in his career thus far.
Still, this non-judgmental attitude does not seem to apply to business leaders, perhaps because we view them less as stars than as employees. Or maybe it is because we expect more from them in terms of leadership. However, in a very real sense, those CEOs and top executives are much like Julia Roberts or Tiger Woods. As talented experts in a specialized field, they create value which far exceeds the salaries they earn.
The truth is that CEO’s feel perfectly justified in receiving salaries, bonuses and special favors that seem outrageous to the rest of us. From their perspective, they are increasing shareholder value, running a complex operation, putting future generations in better position to thrive, making many people around them rich, launching great products, and having a profound impact on the world. Few executives would ever go on the record and say so, but in private, most would dismiss any questions about their extravagant treatment. The justifications they provide might fall into one of three categories:
The public doesn’t have all the information.
The public sees some raw numbers, including the CEO’s salary and the company’s stock performance, but has no idea about the company’s real value, nor how much the CEO has contributed to that value historically or what the CEO has done to prepare for a successful future long after his departure. The public also has no idea how hard the CEO has worked to achieve his expertise or experience in the first place, nor what personal and career sacrifices he has made along the way. Finally, the public doesn’t understand the extent to which the CEO is on call and in service of the organization ALL THE TIME. If perks and benefits extend into the CEO’s private life, chances are that CEO has no private life. The country club membership, the second home, the Lear Jet, the laundry and catering expenses, all are provided to the CEO because they are connected to his service of the company. Nothing is personal ¾ it’s all business. A CEO’s job is not like that of an employee at any other level. It has no physical, emotional, or mental boundaries.
It’s a free market.
The amount a CEO receives salary is not pulled out of thin air. Rather, it is a rational number tied to the CEO’s perceived value and based on what the market will bear. No one criticizes Tiger Woods for getting forty million dollars to wear Nike’s swoosh, and five million dollars to appear in American Express ads. We assume that those organizations are making a rational decision, based on their perception of Tiger Wood’s value to their brand, and paying him accordingly, beating out competitors in the process. No one questions whether Hollywood studios are throwing their money away when they sign Julia Roberts to open their next blockbuster picture. In the same way, publicly held companies are not going to reward a CEO beyond his market value. A CEO’s salary is not a sign of boundless gluttony; it is a barometer of market conditions.
Keeping score ¾ the drive to win.
CEO’s themselves may be guilty of using perks, benefits and bonuses in another way. They are very competitive people by nature; they know what their colleagues in other organizations are getting; and they like to keep score. Salary and bonuses is one form of score keeping. Flipping to the newspaper article about executive compensation, a CEO is just as likely to look at the numbers as the rest of us, but he is probably comparing his own salary with a colleague’s. If the numbers are out of whack, the CEO is bound to feel competitive juices flowing. It may seem strange or petty to those who do not feel such urges, but it is part of the excitement of the game and critical to the drive to win. Consider the ongoing naval arms race among high tech CEO’s. Fifteen years ago Larry Ellison, CEO of Oracle, bought a yacht for twelve million dollars. Jim Clarke, founder of Silicon Graphics, wanted a bigger boat that was going to cost him thirty million, so he hurried the Netscape IPO and inadvertently began the high tech bubble. Larry Ellison countered again with an eighty million dollar yacht. Paul Allen, co-founder of Microsoft, not to be outdone, bought his yacht for one hundred million. Meanwhile, Jim Clark is at it once more building a schooner that’s estimated to cost one hundred million, too. If you think that these gentlemen don’t know the exact size, cost, and other details of their boats, you don’t know how a CEO’s mind works.
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.
