, , , , , , , , , , , , , , , , , ,

by Paul Kiser [Twitter: ] [Facebook] [LinkedIn] [Skype: kiserrotary or 775.624.5679]

Paul Kiser - CEO 2020 Enterprise Technologies

Mega executive pay and bonuses do not work. Mega executive pay and bonuses do not work. Mega executive pay and bonues do not work. Got it? No? Then watch this RSA Animate video by theRSAorg posted on YouTube featuring Dan Pink discussing pay and motivation:

Dan Pink: Drive and Purpose YouTube Video

In research and the real world the idea that mega pay makes for mega profit has been proven wrong over and over, yet we still have corporate directors handing out millions of dollars to single individuals…even when that person has led the company to failure. Why? Let’s go back to cognitive dissonance.

We are conditioned to believe that the more we pay, the better the quality. That is drilled into us. Value is determined by how much money we pay for a product or service. How could it possibly be different in paying an executive? So when MIT research, or Goldman Sachs, or BP, or Massey Energy, or General Motors , or Washington Mutual, or Merrill Lynch (the list goes on) demonstrate that mega pay does not equal mega performance…or even good performance, then people overlook the evidence and begin to use irrational logic to justify mega executive pay. Earlier in May, Bill Virgin wrote a piece for The News Tribune in Tacoma, WA to justify corporate exec pay where he said:

“Corporate CEOs have employees, labor unions, investors, customers and government regulators to worry about.”

One might think that CEO’s were alone on a white horse fighting off evil with a shiny silver sword according to Mr. Virgin.  The fact is that often the workers under the CEO have a much more stressful environment and in some cases lives hang in the balance, so the CEO’s typical responsibilities fail to be a good reason to pay them hundreds of times more than the workers under them.

The surprise is how little is written in support of mega pay for executives. I believe this is due to the people who make the decision (corporate directors) having no reason to adopt executive pay policies that are based in common sense and every reason to maintain the status quo, but they also have no reason to justify their reasons to anyone.  Massive pay means the appearance of importance and if you are the person handing out the massive pay you are even more important. From a corporate director’s boardroom chair the investors aren’t revolting and the customers are still buying, and Republicans are still protecting the practice, so there is no issue to discuss publicly.

But the practice has to change. Not only is it ineffective, it is immoral. Many years ago I worked in a retail store and I learned that the corporate CEO was making $4 million per year and each store was only making an average of less than $250,000 net profit per year. That meant that the work of thousands of employees in over 16 stores were dedicated to providing the salary of one person…and I can tell you, he wasn’t worth it.

If you watched the Dan Pink video you’ve learned that human motivation is based on many factors. I think the important thing to remember is that ‘satisfaction‘ is the most fleeting of all our emotions. Money is junk food in the world of motivation and performance. Too much just makes you sick.

More blogs