Executive Think is Deadly

“Well, then, let them eat cake.” (Reply of Marie Antoinette who asked why the people were rioting upon being told that they had no bread. This reply was widely circulated, and was one of the things that resulted in Marie losing her head. “A tisket a tasket, a head in a basket. It cannot reply to the questions you ask it.” Queen Marie wasn't being callous. She didn't understand that there was no flour to make bread or cake. She simply thought they were unhappy because they'd run out of bread and the bakers weren't making enough. From her very isolated point of view, this was a perfectly logical and proper solut9ion. )

Ford’s CEO didn’t lose his head. But Alan Mulally certainly deserved to lose his job, and why his board didn’t immediately fire this fool after his remarks is beyond me. After going by private corporate jet to Washington D.C. to ask the representatives of the taxpayers (few of whom have the luxury of brand new cars, much less corporate jets) for a bailout for their stupidity, Mulally, when asked if he would take a salary cut from $21M total compensation to $1.00, said “I think I’m OK where I am.” Again, this congenital idiot should have been fired by the board on the spot.

The problem, however, is that the board of Ford is composed of Mulally’s golfing buddies who think in the same way.

I’m reminded of the story my friend Alva told me about the local GM of Avaya a few years back. When he was meeting with employees to explain why Avaya had to cut their jobs, he was asked why he didn’t get rid of a corporate jet. Rather than responding he proceeded to correct the questioner (who was being RIFed) that it wasn’t A corporate jet, but three corporate jets and a couple of corporate helicopters. Then, this dumbass went on to detail the millions of dollars that these luxuries cost to maintain and fly each month. Again, in a sane world, this individual would have immediately lost his job if not his head.

I must say, however, that I see such idiocy frequently at the top levels. Last December I did one of our Executive Round Tables on ways to thrive in the “coming recession” (which, according to most sources, has long since arrived). I predicted the current credit crisis, and that we were going to see housing in free-fall. I was accused by one of the more conservative CEO attendees at this Round Table of being a “Liberal” (which, for this group, is the harshest condemnation possible) and of being one of the “Liberal naysayers” who just couldn’t admit that George W. Bush was the country’s greatest president and had brought us a booming economy.

To their credit, several of the other CEOs there looked aghast at this fool, and questioned what planet he was living on. But these things point up a very real problem in the ranks of upper-level executives. It is called “Executive Think.”

It is important to understand that these people aren’t necessarily evil. They just live in a world different from the remainder of the human race. When Bush 41 (George H.W.) guessed wildly wrong on the price of a half gallon of milk, he was not alone. Many of the top level executives I have known over the years really, truly don’t “get it.” They live in an insulated world where the economy is booming, housing is stable and the stock market is great. If I weren’t so happy (for their sakes) that they’re getting a wake-up call from reality, I’d feel sorry for them. In the recent crises, executives are now having their noses rubbed in realities that most of us must deal with every day. That they still don’t get it, however, is evident by the fact that, after receiving taxpayer money the congenital idiots who run AIG went away to a plush spa for a four day corporate retreat.

It is this lack of understanding that leads me to say that these people need to be fired by their boards and replaced with “C” level executives who have an understanding of the real world. And this, by the way, is 70% of “C” level executives. The vast majority of the CEOs I’ve met are very realistic and great people. But the 30% who are clueless are going to cause some very harsh regulations to come forth on all of us. This is why we, as their peers, must pull them down before they pull all of us down into the morass of stifling government regulation and interference. And, frankly, if we can’t police our own ranks, we deserve every bit of government interference we get. So we must police our own ranks.

Fortunately, these clueless “C” Level executives are dinosaurs who are well on their way to being extinct. Most executives understand that there are executive behaviors which incite rage and those which engender approval from others. And many executives understand that “the masses” are their customers. Don’t be surprised to see organized boycotts of Ford (I wouldn’t buy a lousy Ford product anyway…but still….). While elections have consequences, so do stupid remarks from top executives. Here are the things that executives in virtually all companies must do now to change public perception of top business leaders.

1). Reduce the obscene gap between the average employee and the executive suite. If we do not immediately reduce the ever-rising income gap between the average employee and the executive suite, both in actual paychecks and in total comp, we are gong to see the government limiting it for us. And you can bet your bootie that, if the government does it, it will be harsher than anything we’d impose on ourselves. In 1996 the average top executive earned $41 for every $1 earned by the average wage-earner. However, in 2006 the average top executive earned $410 for every $1 that was earned by the average wage earner. This ten-fold jump is very unhealthy for society and, if history is any indication, will eventually be very literally unhealthy for executives themselves. No less of a luminary than Warren Buffet has predicted food bank riots in New York City by 2010, as the city’s food banks are dry. Hello, people! Hungry people have always been known to drag the wealthy who are perceived to be corrupt out of their carriages, off their horses, and, in modern times, out of their limousines and beat them and/or kill them.

This earnings gap must end immediately A difference of 400% for average executives (the gap for the “C” Level executives of Fortune 100 firms can be thousands of times) is beyond absurd. It is, arguably, immoral. For the good of society and for the protection of capitalism and the free market, we must police ourselves to change this.

2). Excessive “perks.” But salaries are only the beginning. The enormous difference in “perks” is even more scandalous. When luxury perks, special loans, corporate jets or helicopters, etc. are added in, the gap becomes even wider.

The problem is that executives often think that they deserve these things. If the company is privately held, well, realistically the owners can take as much as they want out of it and explain or not explain to their workers. If their workers don’t like it, they can leave. But this isn’t true of a publicly traded company. Share-holders often complain about executive pay, but most companies are set up so the share-holders, who are the true owners of the company, have little or no say in what executives are paid. This is because the board is composed, again, of the executive suite’s golfing buddies, thus assuring no independent oversight of public corporations. This, also, will lead to government regulation, especially in a Democratically controlled Washington, if we don’t police ourselves.

3). Effective immunity from prosecution. Because of the corporate shield, many executives who cheat or steal from others are effectively shielded from prosecution or any other legal consequences. If prosecuted or sued, corporations often pay for the best attorneys possible to get these folks a slap on the wrist. Again, this is likely to change.

The last 8 years of the Bush Administration Justice Department which was owned and operated by large corporations is winding down. The Obama Administration Justice Department is going to be more aggressive. And they have learned since Janet Reno went after Microsoft. They learned a great deal from that case.

Corporate executives are going to be increasingly held personally responsible for dangerous or faulty products, manipulation of the markets, and many other things. Remember, the immunity of individuals in corporations is not a universal value. In fact, it is a value that very few countries hold. In China a CEO who makes a product that kills people, as well as his or her team, can be held for murder and executed. While that is unlikely to happen in America, the corporate shield is going to be dramatically weakened. That shield is a tradition, not an absolute. It can be changed with the stroke of a pen. Once again, we must police ourselves before the government does.

Executives who are going to be successful must stop acting in “executive think,” and begin to see the values of those who have recently turned around companies. The next post will deal with what is effective thinking for executives, rather than “executive-think.” As a preview, here are a few things that newly successful executives must begin to practice. We’ll elaborate next time.

1). Team spirit. Currently, successful executives are those who see themselves as a part of a team, every individual of which is valuable and necessary.

2). A flat organization. Successful organizations are increasingly “flatter.” My company is very successful — and very flat. We are certainly very small by choice. But the same principles are being applied at many successful companies world-wide.

3). Get out of the Executive Suite frequently! As a result of the above two points, successful CEOs are getting out of the executive suites and down on the shop floor, assembly line, out in the field, and so on. Employees who see the CEO eating lunch in the company cafeteria from a brown bag, where they can go and talk with him or her, are incredibly loyal.

4). Equality of perks. My colleagues who work with me have similar needs to mine so far as health insurance, dental insurance, days off, and so on. So WHY, just because my wife and I started the company, should we have tons more perks than they do? Successful organizations give everyone pretty much the same perks. Now, if we could just get the U.S. Congress and U.S. Government to follow the laws they pass, we’d be in good shape.

5). Flatness of pay. This one is sure to raise ire among businesspeople. And it is pretty radical. But, mark my words, just as surely as I predicted the credit crunch and housing crisis in 2003 in a restaurant in South Denver, this prediction of mine will come true, as well. Differences in pay between executives and workers will and must be reduced. Everyone must win, not just the people in the executive offices. And, about those executive offices, anyway….a true executive doesn’t need acreage in his or her office. I’m still a competent executive in a modest office similar to everyone else’s.

And so on. The key word here is “flat.” Companies that want to survive this economic crisis, and, at the same time, survive the sea changes that, as a result of the taxpayers owning some of America’s largest companies now, will be very flat organizations. I’ve said before that humility is the most important virtue for an executive. This has never been more true than now.

Unfortunately, I am skeptical that many of the insulated, arrogant and greedy executives in the executive suites of many of America’s companies will get their heads out of the butts and make the changes they need to make. They are stubbornly convinced of their own rightness. Instead of doing what is intelligent, they are standing on their perceived “rights” to be considered special and above the opinions and reach of society. As so many people through history have realized just before they were executed, these people are not invulnerable. Their money and influence will not protect them forever.

I actually think this is a good thing for American business. Getting rid of arrogant, posturing, narcissists in America’s companies, whether by the perp walk or being voted out by furious stockholders will improve American business immensely. It will be a difficult and challenging time for America until these fools are gone. But, in the long run, it will produce an economy that benefits a great many more people than our current, highly stratified, and corrupt system.

Be prosperous!

J.