Of course, some executives consider themselves worthy of large compensation, no matter how disproportionate or unwarranted. Just ask John Thain, former CEO of Merrill Lynch, who, in a recent interview, told CNBC that it was important, even in troubled times, to give top talent over-the-top paychecks.
If these top executives, at Merrill Lynch and thousands of other firms, are so talented, then how did we end up with 626,000 new unemployment claims filed just last week, with half of our 401(k)s gone, and with, my personal favorite, a $35,000 executive commode funded from the public trough?
Fortunately, there are some executives who get it -- for example, Thomas A. James, CEO of Raymond James. Sound familiar? They are the sponsors of the stadium of the most recent Super Bowl. Raymond James had almost $3 billion in revenue last year. Yet Tom James' guaranteed base salary was only $325,000, less than 20 times the amount of the lowest-paid worker at his company. Compare that with the average CEO salary, which is 262 times that of the lowest-paid worker. (For every "average" salaried CEO who cuts back his or her base salary to a ratio of even 40 times the salary of the lowest-paid worker, almost 200 workers would keep their jobs.)
While the S&P 500 sank, Raymond James had a positive return for its investors. With the bonus he earned, Tom James' total compensation was slightly more than $3 million. But the key word here is "earned." It is no accident that Raymond James has a conservative compensation philosophy and the company also did well despite the carnage in the rest of the market.
Compare Tom James to Robert Iger, CEO of Disney. According to compensation guru Graef Crystal, Iger received $51 million during a year when his company suffered losses and layoffs.
This is how it should be: a CEO with a relatively low guaranteed salary and a bigger upside if the company performs for both its investors and employees. More independence is also needed at the board-of-directors level, so CEO pay decisions aren't "I'll scratch your back, you scratch mine." Finally, we need to clone Tom James to help create leaders who don't view pay for performance as an escalator that only goes up for their benefit.
What is the CEO Patriot Pledge? It's a plea to encourage American businesses to do what they have always done: lead the way with vision and creativity. Only this time, the goal is not to just create a profit, but to keep people employed so there will be a market for our products and services.
In short, our turbulent times require a reversal of a famous quote. Today, "what is good for the country is good for G.M."
CEO PATRIOT PLEDGE
"As an executive, my primary motivation is to act for the good of my company, not just my own financial gain. No one at our company will earn a guaranteed base salary more than 40 times of our lowest-paid worker, and we will offer the same health care and 401(k) matches to employees as we do for executives. We support pay for performance, so when our company's performance serves investors and employees, we'll share in the gains. When our company's performance does not adequately serve our investors and employees, we'll share in the sacrifice."
You can call this initiative naive, but remember that a similar pledge, the Sullivan Principles, played a key role in ending apartheid in South Africa.
Greed isn't good: It's a symptom of poor impulse control and leads us down the path to more Lehman Brothers-style-implosions. My single voice can be dismissed easily, but all of our voices can't. Put the pledge on the bulletin boards of your company, send it to the companies that you own stock in, and ask your friends and colleagues to do the same. Also pass on the link to the "CEO Patriot Pledge" video on YouTube at www.youtube.com/watch?v