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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