The following are approximately the first 1000 words from Chapter 16 of Jonar Nader’s book,
How to Lose Friends and Infuriate Your Boss.

Bread in captivity:

Buckets of jam for the big cheese

Recently, the CEO for one of the companies I worked for raked in over US$80 million for one year’s work, and he took home another US$60 million from stock options, and on top of that, he still had US$270 million in unexercised stock options. This total of US$410 million sounds high, but it pales next to the CEO whose package reached US$910 million in the same period.

Far too many questions have been raised about exorbitant executive salaries. Can they be justified? Are executives adding sufficient value in return? What would happen if we did not reward executives with high remuneration packages? Is it fair that a few managers can, in one year, earn more than their entire workforce combined?

It is baffling to observe the theatrics that companies exhibit when they have to lay-off several hundred staff members, making people jobless and homeless (while blaming the economy; never their incompetence or ineffectiveness). Let us not pick on anyone who is earning $910 million, but let us take a closer look at someone who takes home $40 million in annual salary. That translates to over $750 000 per week, compared with a US$7700 pay-packet that the President of the United States earns per week (plus expenses and benefits). That CEO on $40 million is taking home what 2000 low-wage workers collectively earn in a full year. And this is only calculating the single ‘head of the tiger’, not all the cubs who hang off the organisation chart.

When high-profile executives score lucrative senior appointments, journalists ask if an executive can be worth $40 million to an organisation. It is possible for experts to make a major contribution to an organisation. It would not be hard for a switched-on operator to help an organisation to increase its value by several billion dollars. Sadly, such scenarios are rare, and more often than not, executives who are paid obscene amounts are unable to justify their salary.

Excessive remuneration sends unhealthy signals throughout an organisation wherein workers become disgruntled about such inequity. Over the years, basic wages have increased at approximately five percent per annum for blue-collar workers, while some executive packages have increased at an annual rate of over fifty percent. At the very top, the figures are even higher. There was a time in the 1980s when a CEO could earn forty times the average blue-collar worker’s salary, and that was considered flash. By 1990, that had risen to eighty-five times. In the year 2000, some CEOs were earning over 500 times what the average worker was taking home. While some CEOs are earning embarrassingly high amounts, their performance has been lacklustre, with their company’s overall value dropping by as much as fifty percent over a five-year period.

Those who defend exorbitant salaries typically say that high-level CEOs are a rare breed, selected from a small gene pool. Perhaps the gene pool is not as small as we have been led to believe. Competent executives abound. There are managers who would be satisfied to exert their best effort for a few hundred-thousand-dollars instead of a few million. Take a look at mainstream authors, musicians, and artists. They give their all to their profession, yet contrary to popular belief, their earnings would put them among the lowest paid professionals. Doctors, nurses, plumbers, and public servants, who keep the social wheels turning, earn modest salaries. So what is it that CEOs do, to warrant their astronomical packages? Besides, what would we miss out on if we did not remunerate these supposedly rare ‘whiz-kids’? History has shown that the most significant inventions were given to us by geniuses whose salaries hardly paid for a loaf of bread. Would brilliant managers cease to exist if their salaries were not 500 times higher than a labourer’s wage?

Perhaps it is not a question of finding talented executives who are prepared to take on the top-job. Rather, it is one of finding executives who are prepared to leave their gene pool and allow themselves to be drawn into the spotlight. Could it be that high salaries are dangled to tempt executives who do not want the job in the first place? Those worth their weight in salt would have to be dragged out of the gene pool, kicking and screaming as they are moved up the food-chain. After all, who, in their right mind, would want to become the ‘big boss’ in today’s work environment? Special skills will be required for survival and prosperity at that level. These skills are outlined in Chapter 10, ‘Wanted: The boss of the future.’ The personal attributes that will be needed are listed in Chapter 17, ‘Heads or tails?’

In organisations that focus on the short-term, CEOs are asked to forget everything that they believe in and kowtow to a board that surrenders to know-it-all analysts who can downgrade an organisation with the stroke of a pen. The innocent members of the public know that it is all a game, but they are forced to off-load their shares lest panic ensue. It is a sick sport that triggers a chain reaction. This explains why eloquent CEOs soon lose their wit and drive, and why many of them wish that they could resign. The moment that they are subjected to the realities of life at the top, they regret having pursued such an unrewarding path.

There was a time when sensible managers strived to reach the summit of their career. These days they duck for cover when the post becomes vacant. Those who are too ambitious for the position are ruled out automatically. Instead, the board goes in search of those who do not show interest, because such candidates are less likely to have formed grandiose plans to reform the organisation. Disinterest is thought to be a good quality for a candidate to exhibit. Manipulative boards want flexible, amiable, dispassionate CEOs because they are easier to mould — so long as they can be hooked.

The trick is to lure someone for whom several million dollars is an astronomical amount of money. It could be argued that enduring one year of hell is worthwhile, even if things do not work out, because the salary would go a long way to providing financial security. With this reasoning, candidates accept the post, but often underestimate the next step known as ‘The Dealer’s Grip’. This is a technique used by drug dealers who grip their traffickers by ensuring that they become addicted to the substance they sell.