Leadership and the Overpaid CEO Case Study

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CEO Salaries and Leadership

Leaders are important in organizations, but seldom is leadership just one person. My starting point with respect to CEO salaries is that they are overblown, and CEOs are not worth what they are paid. A truly exceptional CEO can warrant truly exceptional pay, because they make contributions to the organization that reflect in the share price. But most CEOs do not do this. They are too out of touch to lead, and the rest of the leadership team can handle the day-to-day leadership of most companies, with any halfway competent CEO. Most C-suiters are good enough to take on the CEO's job, at least the leadership part, if not the political aspects of it. In essence, I find that there is a pretty significant difference between great leaders who are visionary and can bring about buy-in from people who've never even met them, and most leaders, whose contribution is overstated. Too many people conflate great leaders with average ones, and assume a similar pay scale need not apply. But boards approve CEO compensation, and most CEOs sit on multiple boards, so there isn't much more than a thin veneer of accountability anyway.

As for employee motivation, I don't think leadership is even part of most motivation theories. From Hertzberg to Maslow, motivation theories tend to be pretty inward-looking, take the base assumption of the employee as selfish first and foremost, motivated by the things that he/she wants. Motivation to please a leader is not something that is part of motivation theory. Employee buy-in to a vision is important, but most companies do not have anything to buy into. Does anybody really have a "passion" for serving coffee, selling cars or purchasing clothes? If they do, it is because there is something about that job that fills their own personal needs, whatever those might be. It is not because they work for a visionary company that is going to change the world, one widget at a time.

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Most companies are just not that visionary, but again there is a high proportion of attention paid to superstar companies. Most leaders are a little bit like their companies -- they are transactional, and managerial in nature.

The vision part of leadership comes into play with respect to reading the tea leaves about the industry, and the opportunities that exist to improve the shareholders' wealth. I agree that this is an important sort of vision, but it is not the sort of vision that necessarily inspires employees. I can only imagine the masses sitting in thrall at the CEO selling them on the vision of selling to a private equity firm, or merging with a competitor in order to extract synergies. That's just the nature of business -- most of it is pretty mundane, and people work for companies for pretty mundane motivations. The CEO is not inspirational, nor particularly visionary beyond charting strategy to account for the latest economic forecast.

The reality is that the U.S. is an outlier on CEO salaries. Yes, American companies want the best CEOs from all over the world, but the best CEOs call their own shots, and they don't need the money. All the overpayment….....

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