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  • THE MYTH OF THE OMNIPOTENT CEO

    Chief Executive Officers (or the equivalents) of large organisations are, in the opinion of some, receiving excessive levels of benefits in relation to the value they contribute. Remuneration packages of $2 million or more are not uncommon. This equates to up to 20 times that of even a well paid mid-level manager with significant responsibilities, and twice as much as the other members of the executive team. In the words of a past well known science show presenter: “Why is it so?”

    One of the main factors contributing to this ‘blowout’ in CEO remuneration, has been the flattening of organisations in an attempt to improve communication and make them more efficient. In conjunction with this downsizing was the creation of self-managing teams. The idea was to remove middle management and create competent, self-organising and self-motivated workplace groups, thus improving both communication and performance. Spans of responsibility and accountability and power at the higher levels increased and sitting at the top of the power pile was the CEO. How well these changes worked is not something that can be addressed here. Suffice to say that the changes were much less effective than anticipated, yet the significantly increased status and concomitant rewards of the CEO remain in place.

    CEO remuneration seems to be based on Board assessments, apparently agreed by shareholders, that CEOs must be all-powerful and all-knowing and if they are not rewarded so highly the desired levels of profits and growth will not be achieved. But such ideas have resulted in a myth, an illusion that one person (no matter how talented and experienced) can influence the myriad aspects of a large organisation to such an exclusive degree.

    As we have argued previously, the realities of good leadership practice are that it is impossible for one person alone to influence the daily actions of large numbers of people. The CEO’s main task, with and through the other members of the executive team, is to create the vision and design the mission, objectives and goals and guide their implementation by ensuring that good leadership practice permeates down through the organisation. This requires sound planning, organisation, evaluation, motivation, and in particular, delegation skills. So, what’s new? This is Management 101 stuff and all managers should be past masters at it. Assuming then that they are, and that they develop managers and leaders at all levels in their organisations who accept their level of responsibility and accountability, the extent of the discrepancy between their excessive rewards and those of the other managers and leaders, and particularly front line employees, cannot be justified.

    But the myth will be difficult to dispel. Power provides fertile ground for the growth of hubris and CEOs will be reluctant to give up what they have despite the logic of cascaded leadership responsibility and accountability and the improved bottom line outcomes it invariably brings.

    Peter McDougall
    July 2004