Tuesday, April 21, 2009

Executive Careers in Limbo

It's time for a reality check on executive careers.

Red-hot growth in any sector of the economy is starting to sound like a thing of the past. The Obama administration, in their own words, is committed to a slow steady climb to stability - not a go-go return to prosperity.

The belief is that rapid growth leads to bubbles in the economy ... not to sustainable expansion. They advocate and appear ready to regulate into existence, a tortoise-like "slow and steady wins the race" philosophy. An approach that may prove to be painfully slow for many in the work force who aspire to move upward.

Career growth mirrors economic growth. If the administration has its way, it will take longer to advance up the corporate ladder. Opportunities will be fewer. Executive salaries won't rise and, in some cases, may actually decline. Gaining admission to the C-suite will be pushed further and further into the future.

The cost of the free market

According to Austan Goolsbee, a key Obama economic advisor, government intervention is the solution to sustainable growth. His assertion is that vigilant regulatory oversight will prevent the likelihood of a too rapidly expanding economy ... which he and apparently others in power, see as the cause of the bubble and bust cycles.

I, too, am a proponent of oversight when its goal is to detect, prevent and correct system abuses, but not when its objective is to deliberately retard growth.

And while I totally agree that the lack of regulation and oversight contributed mightily to the current economic crisis, it seems that it was the government officials responsible for overseeing and regulating financial institutions and practices who were asleep at the wheel.

Now they're waking up and you have to wonder why they're not simply enforcing the regulations that were previously ignored. Why is legitimate, robust economic expansion considered a system abuse?

Isn't that what capitalism is all about?

Goolsbee and his colleagues believe that too much expansion poses a threat to the economy. I just can't figure that one out. Expansion equates to job creation. I thought that was exactly how the economy would get out of this downturn.

What message does this send to those who are in ... and those who aspire to executive careers?

Plausible expectations

Fast-track executive careers will take a hit if government manipulation leads to a slowdown in potentially high-growth industries while job creation in fields dependent on lower-income employees will most likely be encouraged as a way to alleviate unemployment.

After all, if you're not eager to achieve rapid growth, how many leaders do you really need?

The silver lining

Should this scenario actually take hold, those who are ambitious and accomplished will not sit idly by and watch the grass grow. Many of the country's best and brightest will embark upon entrepreneurial ventures immune from government intervention while others will seek opportunities abroad.

And a new industry may be born ... business consultants specializing in slow growth. No training required.

Wednesday, April 15, 2009

Overtaxed Executives

Memo to the governors of New York, New Jersey and Connecticut ... your executive talent pool is looking to bolt.

The barrage of recently announced state taxes has put many of those earning $250,000 or more in an untenable situation. And while some believe that these executives are people who can afford to pay more taxes, the reality is most can't.

The numbers don't lie

A senior executive I've coached for years is a prime example. He holds a highly responsible position at his company, earns a base salary of $175,000 and in some former years, almost doubled that with his bonus. His wife is a substitute teacher in New Jersey and between the two salaries, they've been providing for three children, employing a nanny, making monthly payments on two cars and a home mortgage and spending their fair share to best support the local economy.

However, his company did not award bonuses this year. His retirement portfolio declined by over 45% in 2008 and he pulled money out of his 401K recently to put on a badly needed new roof. His local property taxes have been rising steadily and he'd like to sell his house and downsize, but with the declining home values in the area, he finds he owes more on his house than it is worth.

His wife has been trying to get a full-time teaching position, but the funding has been cut back, so no solution there.

And now his already high-taxed state, one of the highest in the country, is raising the state income tax.

Recipe for disaster

As the tri-state area's governors seek to balance their budgets, they seem to have found no other alternative than to raise existing taxes and impose new ones to make up the shortfall.

This looks like it will backfire.

Many of the six-figure earners I'm coaching are exploring job options in states where they can keep more of their earnings. They argue that paying higher taxes for fewer services, while at the same time digging themselves into a deeper financial hole, defies logic.

Add to that the fact that career opportunities in the New York area are not exactly flourishing and you can understand why so many executives are willing and even eager to search elsewhere.

So at a time when the best and the brightest are needed to stay right here and lead our local market out of the current economic morass, the government is driving them away.

Now how exactly is this economic recovery working?

Friday, April 10, 2009

Stress Tests For Executives

Is Geithner planning a stress test for executives?

Rick Wagoner, the former CEO of General Motors was, in essence, fired by the government. And last week's announcement that more top executives may have to go ... seemingly at the discretion of Tim Geithner ... was enough to make heads in the C-suite turn like a page out of the Exorcist.

I have nothing against Geithner ... but last I looked, his title is Secretary of the Treasury and he's been a government bureaucrat his entire career. Having formerly run one of the country's largest federally-funded career development programs, I know something about government-controlled enterprises.

At best, they're cumbersome and at worst, they're incompetent.

Performance metrics modeled on Sudoku

If the administration follows through on its threat to replace more CEO's, it's not much of a stretch to envision them replacing the rest of a company's executives, officers and board members. And, if my experience is any gauge, this will be accomplished by utilizing numbers that may not even remotely resemble any valid criteria.

I'm sure they mean well, but how can one expect government officials to understand and manage the intricacies of businesses in which they've never participated?

I'd rather have Jamie Dimon than Barney Frank calling the shots at JP Morgan.

Be careful what you wish for

However, the public outcry of "off with their heads" has taken hold and executives are under siege. By refusing to take back TARP funds the government has signaled that it stands ready to dictate to - and who is in - the C-suite.

In a recent survey, only 53% of the country asserted that capitalism is superior to socialism.

I guess our new business leaders will be Nancy Pelosi, Christopher Dodd ... maybe Al Franken.

Unfortunately, they won't be subject to stress tests, but they will be capable of subjecting American business to stress.

Wednesday, April 1, 2009

The Unintended Consequences of Executive Compensation Limits

As the populist movement to punish all executives for the sins of a few gluttonous ones gains momentum, the facts and the fallout are being ignored.

Limiting executives' compensation while simultaneously raising their taxes is the ideal formula for decreasing productivity and "turning off" the leaders of corporate America. That's perfectly okay, if you like rudderless ships.

While executive comp limits may assuage the anger at the multimillion dollar bonuses given to a group of greedy Wall Streeters, the fact is the majority of executives making over $250,000 a year in the New York area are not drinking champagne on their yachts. Most senior-level employees work long hours and struggle with serious work-life balance issues as they try to not only do well at their jobs, but to juggle the demands of both family and business.

I know far too many people in leadership positions at their companies who are banging out emails at 11:00 PM and working weekends in order to ensure their companies survive ... and they earn far less than the salaries and bonuses that make the headlines.

But, in this environment, where just the title of executive can bring scorn, these hard-working people are seen as part of the problem when they are precisely the ones needed to lead American companies out of the current economic crisis.

When did doing well become a bad thing?

After letting this blog lie fallow for several weeks as I tried to catch up with my own practice and those folks seeking career help, I can attest to the disillusionment and discouragement that executives are experiencing. Instead of seeing years of hard work and commitment rewarded, they are being punished.

It's as if success in business is a crime which now carries a hefty fine.

Throughout our lives, we are taught to do the best we can ... status, prosperity and a better life are out there, we're told, if we give 110% effort to all we undertake.

But the current political, populist climate refutes that notion. Executives who have been diligent, resourceful, engaged and accomplished are being undermined by the very society that previously praised their efforts. The demand is still for 110%, however the status, prosperity and prospects for a better life seem to have been put on indefinite hold.

24/7 turns into 8/5

The fallout from limiting executive compensation is easy to see. Without being rewarded for their efforts, why would anyone work as hard? And without the long hours and dedication, how are companies going to grow?

That's the reality no one is talking about. As the outcry by politicans and government officials for executives to earn less grows louder and laws enacted to make it so, corporate growth is somehow lost in the din. It may satisfy the public rage and produce some easy votes but if you're not going to fairly compensate your leaders, where is the incentive to put in the time, innovate or for that matter, even care?

I need to check the definition of capitalism. Looks to me like it's changed over the last couple of months.


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