Enterprise Architecture: From Incite comes Insight...: Enterprise Architecture: Are you willing to take a paycut to save jobs?

Thursday, February 05, 2009

Enterprise Architecture: Are you willing to take a paycut to save jobs?

Many executives are indoctrinated into the repeat after me, I believe that top talent needs to be compensated to market rates as an excuse to make extreme compensation...

In today's economy, the real leaders will their own needs aside and do what is right for others. Real leadership requires followership and no one today is stupid enough to follow a CEO who is excessively compensated in today's marketplace regardless of the factors at play. Consider:

Bear Stearns: $34 million for CEO James Cayne. The acknowledged direct cost to the taxpayers from Bear's demise so far is $2.7 billion; ten times that number may be a more reasonable assessment of the actual cost.

Lehman Brothers: $27 million for CEO Richard Fuld. The financial freeze that followed the collapse of Lehman is seen by many as the key event that turned the recession of 2007-08 into the frightening freefall currently under way.

Citigroup: $25 million for CEO Charles Prince. Citi's stock price has since fallen from $50 a share to $3.50.

Countrywide Financial: $43 million for CEO Angelo Mozilo. According to Ashcraft and Schuermann, Countrywide was at that time the nation's leading issuer of subprime mortgage-backed securities and the third biggest originator of subprime mortgages.

That these individuals should have profited so richly from running their companies into the ground, and bringing the rest of us down with them, offends anyone's sense of justice. But it also raises a profoundly important question from the perspective of economic efficiency, in that the above numbers constitute a prima facie case that there were powerful economic incentives for these individuals to make decisions that were in fact not in their companies' or society's best interest.

Leadership isn't just focusing on Wall Street but also Main Street and we all have to look out for each other. The 2009 leadership theme should be to encourage the enterprise to be more human...