Imagine you are in a courtroom, sitting in the witness stand. The court is jammed with people you know – your colleagues from the C-suite, the board of directors, shareholders and your employees.
You are being asked to defend your paycheck.
It’s not as outrageous a scenario as you might think. All over the world, more and more people are chiming in with their assessment of executive compensation. The scrutiny is particularly acute for CEOs who, in some instances, have been vilified for the gaudy compensation packages they have negotiated.
The debate over executive pay has been most vigorous in Switzerland. On Sunday, the Swiss voted against a proposal to limit executive pay to an amount 12 times what the average worker earns. This follows an earlier vote in March, in which voters approved new powers for shareholders to review and manage executive compensation.
Like it or not, executive compensation is a live issue that can seriously affect the way you and your organization are viewed. Those who accept compensation packages that appear out of whack with the performance of their organizations have become the whipping boys and girls of the business media.
Some CEOs have used the issue to their advantage. Costco CEO Craig Jelinek has received tons of positive publicity for his relatively modest compensation package, and the industry-leading wages and benefits provided to employees. Last year, Jelinek earned a total compensation package of $4.83 million. That’s a lot of money, but far less than the CEOs of other large retailers.
How much is enough when it comes to executive compensation? I don’t believe there’s a single right answer. However, I have found with my clients that the best executive leaders are those that can justify their salary and other compensation based on the quality of their leadership and the sustainable results they drive in their companies. In the end it’s about the value you create as a leader.
Are you creating value based on strong financial results and the brand reputation of your company? Are you creating value through strong employee engagement, a robust pipeline of future leaders, and organization culture that is vibrant and healthy? At a personal level, are you considered trustworthy as a leader, both inside and outside your organization?
If you can say with all honestly that you have met or exceeded all these requirements over the long term, there is a good chance you will be given more latitude when it comes to compensation.
If, on the other hand, you failed to create value at these basic leadership accomplishments, then it’s likely you’ll find yourself in the witness box facing some tough questions.
Over to you – this week’s gut check asks you to reflect on whether you can defend your paycheck as a leader? What’s your answer?
About the Author
Vince Molinaro is the Global Managing Director of Strategic Solutions at Lee Hecht Harrison. He is also the author of The Leadership Contract – a New York Times and USA Today bestseller. Vince has spent more than 20 years as an adviser to boards and senior executives looking to improve leadership in their organizations.Follow on Twitter More Content by Vince Molinaro