A CEO letter to the Board…long overdue

24 October 2014

This began as an imaginary letter that I first drafted in the 1990s, and published in the Financial Times on 29 October 1999. It has been revised for this TWOG.

Dear Members of the Board

I am writing to you with a proposal that may seem radical, but is in fact conservative. That is because my primary concern as Chief Executive Officer of this company is to conserve it as a healthy enterprise. You are now paying me so much that I can no longer run this company as I should. I hereby request, therefore, that you cut my salary in half and eliminate my bonuses.

We have talked a great deal about teamwork in our enterprise, that all our people are in this together. So why I am singled out by virtue of my compensation? Bonuses are the worst part of it. Like everyone else in this company, I am being paid to do my job. Why should I be paid extra to do a good job? If I believe in this company, I’ll buy its stock. If I don’t, I’ll quit my job. The misguided assumption behind these bonuses is that the CEO does it all. (I recall a claim in Fortune Magazine some time ago that in four years, its CEO had “added more than $40 billion to IBM’s share value.” All by himself!)

Now I am getting hate mail from employees about my pay. This is certainly disconcerting, but more troublesome is that I have no reasonable reply to them, other than to claim that I am several hundred times more important than they are. Is this leadership? Is it any way to run a company?

We have had a good deal of discussion at our meetings about the long-term health of this company. Why then am I being rewarded for short-term gains in the stock price? You all know perfectly well that I can use all kinds of tricks to drive up that price, and so drive up my bonuses.

Ever since we started this Shareholder Value nonsense, our culture has gone to hell. The frontline employees tell me this gets in the way of serving customers: they are forced to see dollar signs out there, not people. Consequently, many of them don’t give a damn any more. As one put it to me recently: “With all this counting, we don’t count any more. So why should we care?”

I have always prided myself in being a risk taker; that is one reason you put me in this job. So how come I cash in big when the stock price goes up but pay nothing back when it goes down? Some risk taker! You know what: I’m tired of being a hypocrite.

I know the line we have been using all along: that I am being compensated in this way to keep up with CEOs in comparable corporations. This makes me a follower, not a leader.  Enough of this complicity in behavior that we all know to be outrageous. My salary should not be some kind of external trophy, but an internal signal about the culture we are trying to build.

So please, help me concentrate on managing this company as it should be managed.

Sincerely,

Your CEO

P.S. I shall be moving out of my office, way up there on the top floor. I don’t want to be a “top manager”; I want to manage on the ground, where we make our products and serve our customers. This seems to have worked out well for Steve Jobs.

For a much longer piece on what’s wrong with executive compensation, see my article “No more executive bonuses!” in The Wall Street Journal, 30 November 2009 

For all my TWOGS (from tweet2blog, @mintzberg141) since 2 September 2014, please see www.mintzberg.org/blog.

If you wish to be notified of new blogs, please email henry.mintzberg@mcgill.ca with "blog" in the subject.

© 2014 Henry Mintzberg