A relatively new national epidemic is hitting corporations across the country and it is called: The Superhero CEO. The mind boggling compensation packages offered to top executives such as Michael Eisner at The Walt Disney Company, Steve Jobs at Apple Computers, Sandy Weill at CitiGroup and Jack Welch at GE have created a complex corporate problem that will not go away anytime soon. The complexity of the problem is that it pits "The American Dream" directly against "Good Old Common Sense."

Here's how the mythology plays itself out:

A corporation either hits hard times, spins off from a larger corporation, starts from scratch, forms through a merger of two or more former corporations or needs to replace a retiring CEO. The members of the organization and its stockholders look to the new CEO to generate extraordinary success. Consequently, compensation is not an issue. Any figure no matter how ridiculously high it becomes is justified because this one person is now seen as the savior of the corporation. (Note Michael Eisner's $90 million in compensation last year and the thousands of people let go at Disney World.) Even if the results generated are terrible, the CEO's worst-case scenario is to be fired with an unbelievable golden parachute. If anyone questions the compensation awarded an individual CEO, the rationale provided goes something like this, "We should never put a cap on what an individual can make. If their performance warrants that level of compensation, then that's what they should be paid. That is capitalism, and it is what makes this country so great." Granted, I believe in free enterprise, but I also believe in common sense. Has one person really generated that much value for the corporation, or have the board members allowed this "compensation run amuck" program to go out of control to save their own positions?

An executive by definition is a person who makes decisions. A CEO is responsible for making decisions regarding the mission of an organization, the overall strategy guiding the activities and decisions of the members of the organization, the culture of the organization and the parameters of the organization in terms of expected results, behaviors and values. This is a very important role indeed. But is it worth $50-$500 Million a year? I don't think so.

When one person is paid that much money, it creates multiple problems including the following:

1. The Mindset Of Royalty
2. The Lack Of Development Throughout The Organization
3. A Culture Of Dependency

The Mindset Of Royalty

I've often wondered why people in England allow figureheads such as Queen Elizabeth and Prince Charles to be paid exorbitant amounts of money for not having any true responsibilities in terms of business outcomes. Then it struck me: it makes the citizens feel good to be associated with royalty. The same is happening in some corporations. Just knowing that someone is making $100 Million or more within their organization allows them to feel that they are associated with royalty. Of course, the purpose of a business is to create customers and continually add value to them, not to create members of royalty, but that seems to have been forgotten.

The Lack Of Development Throughout The Organization

If one great knight in shining armor is going to save the organization, then why should other people learn the skills of identifying and creating a desired culture, thinking strategically, clarifying expectations of behaviors and values, or defining the purpose of the organization? Consequently, the organization becomes devoid of capable CEOs and must go outside of their walls to find the next great leader. This happened at IBM and The Walt Disney Company as well as many other corporations. When this happens, the organization believes it must promise anything and everything imaginable in order to save itself. The truth is it would not have been in this position to begin with if it had not become so dependent on one individual. Every employee at every level of an organization needs to learn what mission, strategies, culture and standards are and how they relate to driving better business results.

A Culture Of Dependency

If one person supplies all of the critical decisions, then why should the other members bother to learn how to think for themselves? At the same time, this situation also discourages members from speaking out and challenging the approaches deemed necessary by the CEO. The culture creates a dependency by lower level staff members on the CEO and the top executive team. This weakens collaboration throughout the organization, which simultaneously weakens the long-term value that the corporation can add to current and future customers. As a result, the incredible compensation package for the individual CEO has a counterproductive impact on the overall value created by the organization as a whole. Look at the decline in value at The Walt Disney Company, Apple Computer, and many others as an example of this.

The ironic thing about these wildly rising CEO packages is they all began in the mid-1980s with the story of Lee Iaccoca and the financial crisis at Chrysler. He decided to appear on commercials discussing the way Chrysler would win back customers and save itself from bankruptcy in order to bring a human quality to the turnaround. As a result of this visual image, American businesses began to believe that one individual could and should drive corporate success. This fallacy in business thinking has run its course. Corporations are not great because of a single individual. They achieve greatness by the collective efforts of the members of the organization. Is the CEO critical to its success? Absolutely. Should the CEO be compensated well? Absolutely. Should the CEO be paid 5,000 to 10,000 times as much as the average employee at the organization? Absolutely NOT! The disease of the "The Superhero CEO" has run its course. Corporate boards and employees must have the courage to step up and remove this cancerous mindset before it wipes out the long-term value generated by the corporation.

Dan Coughlin is president of The Coughlin Company, Inc., a firm that specializes in enhancing the effectiveness of top performing executives, groups and organizations.

New Book: Corporate Catalysts: How to make your company more successful, whatever your title, income, or authority." Visit our secure store for more details.

P.O. Box 1245 Fenton, Missouri 63026
Phone 636.825.6611 Fax 636.825.9831
E-mail info@thecoughlincompany.com