La fin de la stupidité? Peut-être.
Could the earnest new President stop the foolishness of our worship of our American princes? Could the almost inconceivably huge failures of competence by CEOs and financial pros snap us out of worshiping, obeying and grossly overcompensating these clods?
Today showed one step toward bringing us as a nation into the light. Barack Obama put modest limits on compensation of heads of failed companies getting federal bailout funds. Granted, to us lesser mortals, such terms as keeping a cash payment to a managerial deficient below half a million dollars seems neither cruel nor fierce. Yet this class of American aristocrat is accustomed to being treated with fealty.
How did we in this allegedly egalitarian nation come to this turn? We create our princes (with a tiny number of princesses). We structure our taxes and compensation so that they in turn pass their power and wealth to their own wretched offspring, regardless of ability or temperament. Even worse, no matter how badly and how long they mess up, we reward them with money and the message that we cannot survive without them.
Coming through American Management Associations, Inc. Magazine and the business press, I have been stunned by the self-delusion and mass delusion that has brought us to this disaster, this crux. Of course, we focus on emerging stable from this financial collapse. Yet, on the other side, we shall head for another if we do not deny our artificial princes.
The should be absolutely no doubt now that:
- The typical business leader is neither magic nor wise, rather likely marginally competent.
- Absurdly high pro athlete salaries provide much higher returns to their team owners than most CEOs do to their companies.
- Board directors paying huge packages to CEOs and COOs is a CYA move, not a guarantee of success.
- Structuring compensation to reward big shots when stock price and profit margins plunge is asinine.
Mediocrity trumps meritocracy.
Truth be told, rationalizing our economy and corporate governance goes against human nature as well as our own spotty American culture and history. We may like to brag about simultaneously breaking with colonialism and monarchy. Yet, we understandably feel the very human need for stability and parent figures. We have transferred our Tory leanings toward making a destructive set of petty royals.
Disclaimer: I have written considerably about management and was the editor of a big McGraw-Hill handbook on boards. I can go on at some length about these topic, but won't, at least here.The short of it is that the business chiefs and financial machers who bungled into the current chaos are of our own creation. We treated them like royalty and they believed it. Boards, shareholders, bureaucrats and plain folk needed to believe that the best of us rose like froth on the cappuccino. With the best of us in charge, all would be well, the meritocracy would make the corporations, our economy, our nation, our world work as they should. We would prosper.
The bitter and inescapable facts now confront us. As with politicians, a few CEOs are extraordinary in their perception and decision making. Alas, the vast majority are frauds, just plain folk in expensive clothes.
This delusion plays out at much lower levels as well. Up here, we pretend that a Harvard Business School MBA shows you're smart and means you will do well for any company who hires you to be boss. This same shabby drama plays out in different places and at many levels. In smaller economic ponds, the pretense remains that the children of the wealthy and the legacy graduates of whatever local university has prestige are vastly superior.
Plain folk in expensive clothes.
Another truth to be told is that far too many marginal minds fit those scant criteria. Whether it is running corporations or writing books, the most talented and brightest are far too often not in charge or not allowed to contribute. We end up working for, using the products of and reading the output from the okay. Mediocrity trumps meritocracy.
With multi-trillion dollar evidence of this compounded incompetence, this terrifying period offers our best shot at bringing some sanity to our system. We can't expect parents to stop giving their kids undeserved advantages — that is all too human. However, we can set legislative and regulatory requirements for corporations we help survive.
In turn, actions like Obama's today can catalyze a corporate culture shift. Boards and shareholders can learn that prudential behavior with corporate assets requires honest evaluation.
When it is plain that paying many millions, even hundreds of millions of dollars, in annual compensation does not ensure success, stop paying. You can't buy even short-term success from an artificial prince or pretend wizard. The goals of both regulators and directors must include:
- Rewarding success, but not failure.
- Maintaining a productive workforce that returns loyalty and keeps the smarts in the company.
- Setting the shareholder expectation that prudent management never aims at short-term stock-price.
We'll all be discomforted short-term and mid-term. This is the ideal time also to be emotionally discomforted as consumers, investors, managers and directors. We must stop dreaming the fantasy that our demonstrably incompetent princes are worth what we have been paying them and how we have been treating them. Our directors as well as our President must be more demanding.
Tags: massmarrier, Obama, corporations, invocation, aristocrats, delusion