Many of us may be reassessing our salaries and career prospects as we enter the new year, but for CEOs there is an additional dimension to consider: how their pay may have an impact on the corporate culture.
Tone from the top has always mattered. When Henry II said: ‘Will no one rid me of this turbulent priest?’ back in 1170, he probably didn’t really want four of his knights to murder the Archbishop of Canterbury. Such was the desire of the knights to avoid his displeasure that they literally took the law into their own hands.
The super-wealth of very rich CEOs gives them power above and beyond their corporate status
When a leader has absolute power of patronage, their whims are likely to be actively prosecuted, even if they are morally or ethically questionable. Senior executives – the modern corporate version of knights – probably didn’t reach their position by questioning the all-powerful CEO.
Corporate kingdoms
To me, some large companies have become more akin to kingdoms than businesses. There is an absolute monarch, there are courtiers, and dissent is not encouraged. I recognise that the majority of companies operate ‘normally’ but I suspect every reader will recognise some of the traits I am describing.
Consider the possible career path for an aspiring junior executive in a company with a domineering CEO whose pay is 120 times more than median pay, the current average for FTSE 100 companies. The rewards are potentially enormous, with the sort of wealth that used to be the preserve of entrepreneurs and those with very rich parents or partners. Rewards a bit lower down the corporate ladder may still be generous but will be pocket change compared with the CEO’s package.
Rich people have much more power than poor people, should they decide to use it. They have much more freedom of action, from exercising patronage to quitting in a huff to launching legal action. The super-wealth of very rich CEOs gives them power above and beyond their corporate status. I suspect that this lies behind the frequent failure of non-executive directors to constrain CEOs who develop Henry II syndrome.
Taking on a rich and powerful bully takes a very brave individual
I wrote an article about the damage that bullies can do in an organisation, and a rich bully is even worse than a poor one. Bullies rely on being able to intimidate others, and visible wealth makes that easier. Taking on a rich and powerful bully takes a very brave individual.
I am not suggesting that all, or even most, highly paid CEOs behave like medieval monarchs. What I am suggesting is that it is very hard to stop one who has decided that they are the chosen one.
Tactics for the top
Coming back to my aspiring executive, I think it is worth reflecting on the sort of person who will try hardest to climb the ladder in a company where power and rewards are heavily concentrated at the very top. It is also worth reflecting on the likely tactics the aspirant will use to get there.
Which sort of person flourishes tells you a lot about the corporate culture
Some of the ambitious will decide that talent, hard work and collegiate behaviour are the way forward; these are the people you need in any organisation. Others may decide that the relentless pursuit of short-term goals regardless of ethical norms is a better option; these people can do immense damage. Which sort of person flourishes tells you a lot about the culture in an organisation.
When Lord Acton wrote in 1887 that ‘absolute power corrupts absolutely’, he could have added that ‘the pursuit of absolute power seldom brings out the best in people’. Next time you see an all-powerful CEO in action, ask yourself whether the culture they inspire is meritocratic or toxic.
