A Cycle That Never Ceases to Offend
Jun 29th, 2009 by Alex
The result of a company policy about mandatory retirement for executives, our CEO is stepping down. As I look back over the past couple years, I’m not thrilled with the path he has led us down. In fact, I’m irked.
Did our CEO do a lot for the company? From my position as a worker bee (with no managerial duties), not really. Did our CEO increase my personal wealth by way of stock price? No. Neither of these two things are guaranteed, so what happened during his tenure that makes me mad?
Our CEO lauded several measures to diminish employee control of the company. For one, an important employee benefit was downsized. I feel that employees do better work when they feel like it’s their company, so I wasn’t thrilled when employee discounts were reduced for those wishing to purchase preferred stock. Secondly, a restructuring of stock was proposed that leaves employees with less control of the company. This wouldn’t have been so bad, but our CEO went to great lengths to campaign that these measures would make the company more attractive in the marketplace. If a CEO really thought a measure was the logical way to go but wouldn’t be around to reap the benefits, why not abstain from the vote entirely? I have my doubts that it’s going to help us out and I voted my shares accordingly, unsuccessfully. Using fear mongering tactics to obtain such objectives is low, moreso when a CEO doesn’t have to stick around for the aftermath.
This behavior isn’t unique to my company. I feel that many CEOs attempt to lead by making things familiar to them. If that means changing a company structure so it better resembles another company they’ve managed in the past, so be it. If that means displacing a lot of people, “hey it’s just what needs to happen so I can run this thing.” And to be fair, they may genuinely feel like it’s the responsible thing to do.
CEOs by and large, come and go. They reap large salaries and so long as they don’t break the law they aren’t accountable for what happens after their departure; meanwhile employees are stuck with the results of their decisions. Say what they like about goals and their promises, their tenure is limited and temporary in nature compared to most employees. That can lead to tunnel vision. Their incentives tend to be financially oriented and though perhaps in the “best interest” of the company, their vantage point is that of someone in it for the short haul. Do the best we can in year or two. It’s half-assed and unacceptable to me.
So a new CEO will be taking over, leaving another company to do so. I have no doubts that we’ll undergo additional changes until we fit his new (and probably different) mold. And so the cycle begins again.
This problem is one of the major things that Obama and Bernanke and crew want to fix with the financial industry. I’d argue–along the lines of your post–that it’s not a problem limited to financial companies. Still, though, how is anyone going to fix this? It seems ingrained in corporate culture at this point. And besides, there’s a lot to be said for a CEO’s power to be sweeping and decisive–sometimes a company needs that. It just sucks when they always want to be sweeping and decisive, regardless of the company’s needs. Oh, and them getting rich regardless of success–yeah that’s the rub.
Jon: A CEOs power isn’t as sweeping and decisive as many imagine; in many cases issues must be brought before (and approved) by the Board, and the big issues to the shareholders. Of course, many of the Board members tend to be CEOs of other companies and rather wealthy themselves. It still pains me that our Board didn’t represent us in this matter, but rather their pocketbooks.
Alex, you are not alone. I was sad to see the vote went the way it did.