When companies face financial difficulties (especially when layoffs are involved), it’s common for CEOs to announce that they will cut their own pay as a way to demonstrate their commitment to the company's financial well-being and to show some warped sense of solidarity with employees who may be facing pay their own cuts or job loss.
I call bullshit. It’s solely symbolic, does nothing, and frankly, is a bit insulting.
Firstly, cutting CEO pay doesn’t address the underlying financial issues facing the company. It may provide some insignificant relief, but does zippo to address root causes, like declining sales, poor management, or an outdated business model.
Next, CEOs that have their pay cut have generally negotiated this with the Board. In other words, they controlled or influenced the timing, the amount, the manner, and the duration – all before announcing said cut to the world. For the rest of the organization – whether 100 employees or 100,000, they control nada. They just get hit in the face with it on a Friday afternoon
Lastly, cutting CEO pay can also look like a CEO avoiding accountability for the company's financial difficulties. By cutting their pay, hope to look like just one of the guys, a victim to the the powers that be – even though they ARE the powers that be.
Cutting CEO pay may seem like a noble gesture, and I’ll concede there are some times when it can be exactly that – though I would argue we seldom know about those, because they seldom come with a PR blitz and press releases.
More frequently, it’s disingenuous and fails to address the root causes of the underlying problems. CEOs should instead focus on addressing the underlying operational challenges and taking responsibility for the company's financial performance. In short – do your job. Do that and be worth the money you’re paid.
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Don’t forget to be brazen, and that grace and accountability can coexist.
For more information on executive coaching visit my website.
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