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Greed and Good
2000, the highest-paid chief executive in British banking, the Royal Bank of Scotland’s Fred Goodwin, pulled in $3 million. His American counterpart, Citigroup CEO Sandy Weill, took in $127 million, forty-two times more.79 These huge gaps between American executives and their competitors overseas are beginning to narrow somewhat. Many top European and Asian executives, who see themselves as every bit as worthy as their American counterparts, are demanding U.S.-style remuneration. They feel they deserve more. Maybe American CEOs deserve less. SOME AMERICAN CEOS, business commentators in the United States agree, do definitely deserve less compensation than they are currently collecting. Executives who fumble away shareholder value, most commentators believe, ought to be getting warnings, not windfalls. By contrast, these analysts are quick to add, those executives who successfully enhance shareholder value deserve our deepest thanks. They have created wealth. They deserve wealth in return. But how much wealth? Corporate America has not, by and large, given this question much quality time. “If shareholders gain a billion in market value, what percentage should go to management?” wonders one pay consultant, Eric Scoones, a principal at William M. Mercer Inc. “I don’t think many people have sat down and asked that question.”80 Corporate leaders, instead, simply assume that the road to business success starts and ends at the top. CEOs, America’s standard boardroom wisdom holds, deserve substantial, indeed almost total, credit for corporate achievement. CEOs frame the vision. They inspire the troops. They ride to the rescue, white knights in blue power suits. They need no help. They seek no help. At America’s finest business schools, tomorrow’s top executives are taught to marvel at the individual magnificence of CEOs past and present. “A business school case in strategy,” notes the British economist John Kay, “characteristically features a named CEO struggling, frequently alone, to resolve the fundamental issues of his company’s strategic direction.”81 Those CEOs who succeed in this epic struggle, corporate America takes as a given, deserve whatever rewards they may gain. “Successful” executives, in effect, have a right to outsized fortunes. Remarkably, even critics of executive pay excess often buy into this heroic worldview. In 1996, for instance, reporters rushed to Graef Crystal, America’s most-quoted executive pay critic, after reports surfaced that Andy Grove, the top executive at Intel, the world’s largest computer chipmaker, had just cashed out $94.6 million worth of stock options. Reporters expected Crystal to be outraged. He wasn’t. “I told the reporters,” Crystal would note later, “that Grove was one of my compensation heroes and that, if anything, he was being paid far too little for his magnificent contributions to the shareholders of Intel of which, I am happy to say — nay, ecstatic to say — I am one.”82