This is a question that has been circulating in academic and corporate circles for decades. And it has been raised once again with the Wall Street Journal's release of the highest paid CEOs. The quantitative evidence of a relationship between high CEO pay and superior corporate performance is inconclusive. However, the answer to the question of whether or not CEOs matter should be transparent without rigorous analysis.
Simply consider the potential impact these select individuals have on:
1. The Global Economy
3. Families and Individuals
1. In terms of the global economy, the collective decisions that CEOs make significantly influence unemployment, output, and productivity rates. Not to mention government tax revenues and which countries receive those funds.
Furthermore, CEOs with sizeable financial resources can leave a lasting imprint on public policy. This is because many of our political leaders are selected through campaigns that require vast capital contributions. Many executives also oversee corporate-funded political action groups that channel resources to favored politicians in the expectation of influencing legislation.
2. Consider communities. As an example of positive impact, many CEOs have directed their companies to embrace the concept of corporate social responsibility. They are choosing to invest a portion of their profits back into the communities in which they operate. On the other hand, when executives decide to close production in a specific location, a local community can lose considerable tax revenue -- potentially leading to a decline in funding for schools, parks, and public health programs.
3. Now reflect on families and individuals. CEOs have the ultimate authority over the generosity or paucity of company benefits such as health insurance coverage, disability, and pensions or 401k programs. These programs have a substantial effect on the physical, mental, and financial well-being of employees and their loved ones. The availability of flexible work options, paid maternity leave, and vacation time are also largely at the discretion of executives. Just as important is the corporate culture -- whether the workplace is conducive to a healthy integration of work and life or leads to the decay of families. This all starts at the top.
If compensation is solely based on influence, it would be difficult to argue that anyone should be paid more than CEOs of large companies. And yes, this includes political leaders.
Like others with authority, CEOs can choose to use their power and resources for constructive or destructive purposes. Instead of looking disdainfully at all who have risen to the pinnacle of their companies, we should recognize those who choose to demonstrate executive excellence.
[If you have an example of a CEO that embodies excellence and servant leadership, please send an email to firstname.lastname@example.org. I will be profiling selected individuals in future posts. All submissions will remain anonymous.]