The ratio of the pay of corporate chief executive officers (CEO) to ordinary workers has exploded in the last 40 years. It was a bit over 20 to 1 at the start of the 1970s, now it is well over 200 to 1, and in good years for CEOs, it can be more than 300 to 1. Steven Clifford’s book, The CEO Pay Machine (Blue Rider Press) is an effort to explain how this happened and what we can do about it.
Clifford speaks from firsthand experience, having spent 13 years as a CEO of major corporations and having subsequently sat on more than a dozen corporate boards. Clifford makes it clear at the onset that he deplores the run-up in CEO pay, but he is trying to explain why it happened.
Clifford’s basic story is that the process that determines pay has become hopelessly corrupted. At the most basic level, the corporate boards that are supposed to represent shareholders and put a check on CEO pay have little interest in doing so. Clifford describes a process of whereby boards are captured by CEOs and other top management. Being a board member is a cushy job, typically paying well over $100,000 a year for around 150 hours of work a year, by Clifford’s calculation. With many boards paying $300,000 or $400,000 a year, the pay can be in the range of $3,000 an hour.
And, as Clifford notes, it is almost impossible to get fired from a board by shareholders. More than 99 percent of the directors who are nominated by the board for reappointment win their election. Furthermore, the boards are typically used to working with the CEOs. The CEOs and their staff are the ones who provide them with information. Often the CEO himself is a board member, usually the chair.
In this context, board members have little reason or incentive to ever challenge CEO pay. After all, the CEO is their friend, why would anyone object to giving their friend more money at the expense of a diverse group of shareholders, the vast majority of whom the director does not know. Furthermore, what difference would a few extra dollars make to the typical shareholder, if this is what it takes to add a few million to the CEOs pay?
Last week’s column addressed “What Older Employees Can Learn From Young Executives.” Granted, all five characteristics represent generalizations and aren’t universally applicable. But as generalizations, they guide thinking toward positive expectations.
The same can be said about what younger managers can learn from older employees. Stereotypical thinking, for sure. Nevertheless, the following traits are common in older employees—and well worth considering.
What Young Managers Learn From Older Employees: 4 Attitudes
Traditionalists and Boomers were taught to let others do the bragging. When they’ve earned the gold watch after 40 years or built their entrepreneurial venture, they take a bow modestly. When faced with competition or conflict, they embrace Frank Sinatra’s observation, “The best revenge is massive success.”
The evidence of humility? Grandparents don’t mind having their grandkids teach them all about their smart phone, program their TV’s remote control, or rewire their sound system. The 60-something CEO will ask the savvy teen next door to build him a website for his hobby and teach him how to log in to update it. The seasoned executive may select an oncologist who has just finished her residency to ensure she’s getting someone familiar with the very latest research and techniques for treatment.
Older employees have lived long enough to know what they don’t know—and be humbled by that knowledge.
It’s tough to hold on to good employees, but it shouldn’t be. Most of the mistakes that companies make are easily avoided. When you do make mistakes, your best employees are the first to go, because they have the most options.
If you can’t keep your best employees engaged, you can’t keep your best employees. While this should be common sense, it isn’t common enough. A survey by CEB found that one-third of star employees feel disengaged from their employer and are already looking for a new job.
When you lose good employees, they don’t disengage all at once. Instead, their interest in their jobs slowly dissipates. Michael Kibler, who has spent much of his career studying this phenomenon, refers to it as brownout. Like dying stars, star employees slowly lose their fire for their jobs.
“Brownout is different from burnout because workers afflicted by it are not in obvious crisis,” Kibler said. “They seem to be performing fine: putting in massive hours, grinding out work while contributing to teams, and saying all the right things in meetings. However, they are operating in a silent state of continual overwhelm, and the predictable consequence is disengagement.”
In order to prevent brownout and to retain top talent, companies and managers must understand what they’re doing that contributes to this slow fade. The following practices are the worst offenders, and they must be abolished if you’re going to hang on to good employees.
Shopping for gifts isn’t the only reason so many of us break out our credit cards and checkbooks in December: According to Blackbaud’s Charitable Giving Report, it’s also the most popular time to make a charitable donation. Why? “People are in a giving mindset at this time of year,” says Jacob Harold, president and CEO of GuideStar, a site that gathers information on nonprofits. “And of course, there’s the tax deduction.”
To qualify for a break from Uncle Sam for your 2016 taxes, you must make donations by December 31. If you haven’t given already, that’s a solid reason to consider being charitable before New Year’s Day rolls around. But the organization you pick and the way you give are just as important as your timing. Here, four ways to help your contribution make the greatest possible impact.
In my 20s, while working a 9-to-5 job, I moonlighted as a babysitter and a freelance writer. The few hundred bucks I brought in each month from changing diapers and staying up till 2 A.M. doing articles helped me crawl out of debt and build a nice savings cushion in just a few years. Today, finding ways to make more is a necessity for many of us: Hourly wages have been at a near standstill since the 1970s, while the cost of key expenses like housing and healthcare has increased dramatically. Thankfully, it’s never been easier to boost your bottom line, with so many websites and apps linking us to paying opportunities. These are just four ways that intrepid earners have found to generate a steady stream of extra cash each month. You might be inspired to do the same.
To save for a place of her own and pay off roughly $38,000 in student loans and credit card debt, Heidi Hall, 29, bought a vacuum. The Bethesda, Maryland, data analyst began cleaning houses earlier this year through TaskRabbit, a virtual marketplace that connects freelancers with locals who need help with tasks like cleaning, moving, and minor repairs. Hall earns an average of $22 per hour on TaskRabbit, netting between $600 and $700 a month, working evenings and some weekends. “I’m a people person, but my day job involves sitting in front of a computer. TaskRabbit hardly seems like work because I get to meet and network with people I normally wouldn’t encounter.”
More than one-third of the U.S. workforce engaged in contract, supplemental, temporary, or project-based work in 2013.
Are you worried about getting swindled out of your savings or losing everything in a crash? Alice Finn, the author of Smart Women Love Money, explains the simple ways to avoid those catastrophes—and warns us about a threat to our earnings one never seems to consider.
If I stopped a random woman on the street and asked her what she thought the biggest controllable risk to her long-term portfolio potential was, I can almost guarantee she wouldn’t guess the right answer. She might say it was the risk of being invested during a big market downturn, like the bursting of the dot-com bubble or the great recession of 2008. She might mention the possibility of being taken for a ride by a Ponzi schemer like Bernie Madoff, or investing in a fraudulent company or one that goes bankrupt. Perhaps she’d mention the risk of not investing at all—sitting on the sidelines and watching as the market goes up without her taking advantage and growing her assets.
Yes, market declines come and go, but if you remain invested in a diversified portfolio of low-cost index funds and regularly rebalance, you ensure you’ll always be in a position to profit from the upturns when they come. If you’re sticking to index funds, there is no risk you’ll end up in the clutches of a Bernie Madoff and his “proprietary” (in this case, downright illegal) investment strategies and products, because you’ll be buying plain vanilla funds that trade in the public markets. And of course, you’ll be staying invested at all times, because that’s the key to making money at all. As long as you invest, and stay invested, your returns keep compounding. The more time you have, the more you can reinvest those earnings and leverage the potential of your original assets.
But there is another risk, and it’s one that almost no one ever seems to consider. The one most of us forget about until it’s too late. It doesn’t grab headlines in the same way a market crash or a renegade money manager might. But it can wreak havoc on how much money you end up with when you have to look at how your nest egg will provide for you and your family.
innovate and know your competition?
Launch a competitor within your own company. Yes, internally.
Why? If you don’t do it, someone else will.
How? Get a team of five (5) people from various areas. For ex. someone from Accounting, Legal, Sales, Marketing, Customer Service and/or Business Development.
What? Assemble the team, have them list weakness and problems the company has, and for them to provide solutions and launch a company that is stronger.
Result: You are taking people who know your company, realize it’s problems/weaknesses and see the opportunities. Do you realize this might save your company, and you may own the market by owning both companies?
Did you know people quit their day job and do this on their own?
Recommend: Form a new entity such as an LLC, owned by your parent company, launch a competitor, create an operating agreement and grant the founding team a small stake before they go out and do it on their own time and dime and come after your customers
Now that you’ve laid the groundwork and have a unique product that your customers want, you are ready to launch. So what does ‘launching a product’ entail and how do you make the most of this challenge?
In my experience, the most successful launches are the ones that have been well thought out in advance. A launch should be seen as merely optimizing the results of the hard work you have been doing through the time leading up to it. As a creative product designer, here are my top strategies for launch:
- Your network: Take advantage of the network you’ve been building for the last 1 year (see part 1 of this series) and announce in-person and over email that you are launching your product on a specific date. Make sure to remind people of the need your product fills or the solution it brings. This will make it easier for them to talk about you. Make this communication as personable as possible (stay away from formal PR release style of communication). Give these people a link to pre-signup to get further information and start building your list (if you haven’t already been doing it). At Madesmith, we use Kickoff Labs to create well-designed sign-up pages.
- Bloggers: A few weeks before the launch, reach out to influential bloggers (large and small) in your industry, and send them a nicely crafted physical package (before sending, ask them if it’s okay), or an email. Make sure to describe why your product is different, how it fits their audience and their blog, and why they would want to talk about it. Remember, all bloggers are looking for quality content. You don’t have to sound like they are doing you a favor, rather focus on how this can be mutually beneficial. Always, make sure that you are reaching out to blogs whose readers might be your target customers. If a large blogger is interested in your product and company, perhaps you can offer them exclusive launch coverage. Make sure to include information about yourself, your story, your vision, high resolution images and other highlights of your product in order to make the bloggers life easy. Again, refrain from sending them lookbooks, and formal press releases. They can come across as impersonal and old fashioned. It’s okay to nudge the blogger if you haven’t heard back in a few days. But, don’t be pushy and make sure to be very polite.
- Social Media: Start getting your followers ready for the launch. Share behind the scenes with them at least a few days before. You could also offer your existing followers additional benefits for early sign up. Create your own buzz and give them interesting angles to talk about with their friends. For example, since our story launches include extensive photography, we post behind the scenes photos to ourInstagram. Our community loves seeing these un-edited glimpses.
- Referral program: A well thought out referral program is extremely efficient and can increase your sales exponentially. Some good examples of a good referral program include Everlane, Dropbox, and Airbnb. Make sure that your referral program is simple and really worth the effort for the users. It should get them super excited and provide enough value to them that they are willing to risk their digital reputation to share it with their networks.