As this month’s unemployment figures were breaking (8.5%), Mark Cuban weighed in on fixing executive compensation. The ideas are related.
As the discussion on executive pay continues, my message is simple. Give credit to those executives who bust their asses to avoid layoffs except in cases where its an absolute necessity. Pay ‘em a premium vs those who cut jobs in profitable companies. Look to private companies as guides to what a well managed company can accomplish, and how executives are compensated. Blogmaveric.com - Mark Cuban
His post is a great reminder that in many ways layoffs are an admission of failure by executive management – the investment in human capital they made has not paid off and must now be written off. This devastating blow to the emotional health of a firm and its knowledge base is not improved by an impression that the executive ranks are rewarded for causing so much pain.
I’m not calling for the CEO to put his head in the sand, truth is, sometimes to survive a company has to lay off people, close plants, sell off pieces of itself. Being a survivor of such culling can be as emotionally stressful as actually being let go. That’s why it is important to remember that employee sweat and knowledge is your primary asset against this downturn and to structure rewards accordingly.
UPDATE 4/3/09: Well, this is timely. Wall Street Journal reported today that CEO pay shrank in 2008. Nice to see that some of those compensation boards weren’t completely asleep at the wheel.