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CEOs 'Off the Rails'

They’re at the top of the tree, they have the POWER, they are paid huge salaries, bonuses and benefits yet we’ve seen a few instances recently where top CEOs have departed their companies in disgrace.

So what makes these CEO’s do the things that they have done?

I remember seeing a tv programme a number of years ago that was examining whether top executives were worth the money they were being paid.  One executive interviewed explained that he had tremendous responsibility and that if he didn’t deliver to (or more likely exceed) expectations he would be out of a job – the guy had received something like a £3m golden handshake, was on a couple of mil a year and was certain to get a 7 figure payout if he went.  He had every incentive therefore to really push the envelope for jaw dropping performance.

But, in the ordinary course of events and other things being equal, that meant he had to take risks.  If they paid off great, his stock went up and his rewards were handsome.  If they went wrong he got the push with his 7 figure severance package (and every likelihood he would be placed in a similar position in the not too distant future) and a new guy would be brought in to lay off ‘x’ thousand poor schmucks, with little means to fall back upon and bleak prospects of alternative work, who would be the real casualties of the ‘gamble’. 

So I am left with the conclusion that a strong part of the problem when these situations arise is EGO (a need to show how great they are to their peers, the investment community and the financial media), their sense of untouchability and that loss of position only means loss of face.


Comments: (1)

A Finextra member
A Finextra member 16 January, 2013, 11:27Be the first to give this comment the thumbs up 0 likes

Typical Tenure of 24 to 36 months.  First set 100 day challenge.  Then blame predecessor for all the companies current/legacy issues.  Attempt to deliver change only within the timescales of your tenure (24/36 months).  Do not commit to anything beyond these timescales as your successor may reap the credit.  Ping pong between positions for a few years and retire comfortably – maybe with a few Chairmanships.