WHAT DOES A $10 MILLION CEO DO?

WHAT DOES A $10 MILLION CEO DO?

James R. Fisher, Jr., Ph.D.
© December 2007

A lecturer on C-Span posed just that question thinking what the thousands of impoverished Haitian families could do with $10 million.

Her question was rhetorical but she had stumbled on to something that may need to be addressed sooner rather than later in this new century. The mythic image of the CEO is crumbling.

Most $10 million CEOs are tacticians at best and strategists at worst.

CEOs changed the color code spectrum of an automobile, or added an airfoil, leaving what was under the hood more or less the same, while their competition abroad radically redesigned the mode of transportation from inside out, and has taken the market from them.

CEOs revved up the rhetoric on empowerment, tightening their grip on command and control, while the competition designed a whole new way to get things done in the workplace called “quality control circles” and “total quality management.”

That sucking sound is the swish of the mounting trade deficit for which they are the architects due to this failure to anticipate and deal with a changing commercial engine.

CEOs are the dinosaurs of the twenty-first century but no meteorite has appeared to obliterate them from our collapsing infrastructure. They are the ugly blight on a rapacious society and the most prominent aspect of society’s pathology of normalcy.

You may smile at this unenlightened lady’s reflections as simply the rant of an ill informed person well beyond her depth, a person left of center in the political and economic spectrum, who knows nothing about the important work that CEOs do.

Or could it be that she sees CEOs naked with C-Span giving her a forum to share her discovery? Is anyone listening? Does anyone care?

More than likely nobody knows actually what CEOs do, or to the fact that some make as much as 1000 times the average worker's take home pay. I've been around them most of my adult life, as a direct report and consultant, and I must admit they are difficult to pin down to a job description, giving off the aura of being untouchables, and therefore generally unsullied when they hear comments to their mind that seem fatuous.

Of course CEOs do important work or where would American industry, commerce and academia be without these people elevated to such lofty positions? Our future depends on them, doesn't it?

The lady answered her own question by saying the world would do just fine without CEOs. Imagine that, saying that in public, and implying that CEOs don't do anything important other than protecting their ranks by maintaining the myth of indispensability.

Now, you say, why even mention such comments? Surely, this woman is quite mad. How would stockholders put up with someone who failed to keep their company shares appreciating?

Well, it gets a little dicey here.

Stockholders display a little ambivalence when it comes to incompetence.

When their shares start to tumble, the price-earnings ratio skyrockets, dividends dry up, and their net worth shrinks, the response is almost always axiomatic. They cry for a change in corporate leadership.

Someone new is brought in, and guess what? For no rational reason, the stock price starts to climb and a new honeymoon period begins. It is a kind of lunacy that makes this woman's madness seem the voice of sanity.

Meanwhile, CEOs who were desperately attempting to manage their watch in the short-short term, and failed, are given golden parachutes to disappear quietly into the sunset.

You don't have to look for such evidence to what happened routinely in this regard yesterday, or last week, or last month. It has been going on for years. Getting fired never looked so good for CEOs.

Take Sidney Jay Sheinberg, who was CEO of MCA a couple decades ago. His contract was the reverse of the prenuptial marriage contract. His contract read: should he lose his job within a year of the company going through a "change in control," he takes home $16.8 million or roughly 23 times his normal annual salary.

MCA two decades ago was a fire sale with top executives not jumping out of windows for the company's failure, but opening their trunks to hold all the cash.

The severance packages for the top five MCA executives cost the company $33.45 million. Add to this another 364 MCA managers were guaranteed lump sum parachutes of three times their normal annual salaries, plus benefit packages and stock options. Their additional parachutes approximated another $82 million.

MCA is mentioned because it is at the modest end of the scale compared to say, IBM, and other prominent Fortune 500 companies.

For instance, IBM's failure to anticipate the impact of the personal computer found the company by the mid-1980s losing $70 billion of stock valuation and the elimination of 200,000 jobs, with surplus employees given the equivalent of golden parachutes.

Indeed, I could itemize in a thousand-word essay the follies and charades of such CEO intrigue, and never cover the subject.

On the other hand, there are legitimate wealth creators that know the business and develop it from the ground up and deserve to be $10 million CEOs.

Among them are the Bill Gates and Steven Jobs of the new world of commerce, where a fraternity of entrepreneurs has changed the face of enterprise, not only in the United States, but also across the world.

Gates has been wise to keep developing people from within from the ground up to assume key executive positions. Jobs has not been so wise.

He must have read Harold Geneen's book "Managing" (1984), where the CEO of ITT claimed competent CEOs could run successfully any business no matter how little they understood the industry or technology. It is one of the more obtuse management pronouncements of the late twentieth century, but again, Geneen was a coffee table name to the CEO community, and when he spoke, people stopped to listen.

Jobs built Apple, Inc. from his own garage into a minor empire with the Macintosh personal computer, and then after slaving 60 - 70 hours a week for years, decided using Geneen's dictum to bring a seasoned CEO into Apple to run the company while he took a holiday.

That person was the affable and likable John Sculley of Pepsi fame, who knew absolutely nothing about the personal computer business, the culture of this industry, nor indeed, of the distinct creative and nontraditional approach to work exemplified by Apple employees.

Sculley practically from day one covered his ignorance with faked hubris as he attempted to put structure, policy and procedure, accountability, and command and control practices into the chaos, and he nearly sunk the Apple ship as certainly as if it were Atlantis.

Sculley did turn out eye-catching color coordinated computers without necessarily bothering much with the hard drive.

He was appalled at the brutal, brash, and intellectual harem that he had inherited, equating chaos with dysfunction, order with productivity, and compliance with cooperation. It didn't take because it was the antithesis of the creative culture of contribution.

Jobs had to return to rescue Apple from extinction. He released his chaotic cohorts into creative bliss eventually coming up with the iPod with Apple again soaring to new heights and new market dominance.

This grandmother looking lady on C-Span was on to something, and I would suggest that CEOs take heed. The days of political and economic license at the top are numbered as they once were for the royalty of another time. Like-ability will no longer carry the day.

Currently, we have the quadrennial madness of presidential primary campaign politics in which the measuring rod to performance is that same old saw of like-ability. That is about as much an index of character and competence as Harold Geneen's famous dictum. Caveat emptor.
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Books by Dr. Fisher that explore the CEO myth are "Six Silent Killers" (1998), "Corporate Sin" (2000) and "A Look Back To See Ahead" (2007). Dr. Fisher was formerly director of human resources planning & control for Honeywell Europe, Ltd., an operation of 12,000 employees in 13 European countries with sales of $10 billion