TO CAP OR NOT TO CAP

The government is insisting on executive salary caps for all the companies that they lend money to in the economic bailout. Normally I would vigorously disagree with that. If someone has provided superlative performance on the job and their employer has the means, than I think they should get a 'superlative' reward for work well done. We have been aggressive advocates for many years on this subject with Boards and individual clients nationwide. There are many not-for-profit executives around the USA that now enjoy performance bonus plans because of some interesting (and at times intense) conversations we had with their Boards 5, 10, even 15 years ago.

The key word here is "performance". Introducing the novel concept of a performance bonus plan in the N4P (not-for-profit) world was often a simple discussion that most Boards agreed to after some thought. Because constant salary increases could eventually price CEOs and other senior executives out of their jobs, we suggested that the Boards give small annual increases but give the executives who performed "serious" bonuses. We defined a “serious” bonus to one Board recently “as something that will make the executive take notice”. That attention getter is dependent on salary level and overall circumstances. If the CEO could add $50K++, or $25K or even $15K [all depending on base salary] to their income at the end of a good year, they would push hard to achieve the annual goals established.

Now the Feds want to limit high salaries in those corporations that received bailout funding. [Remember, what happens in the corporate world will quickly trickle over to the N4P world.] It is sad that some CEOS are so 'over the top' that they order $11,000 waste baskets for their offices. When a few corporate CEOs do things like that, it seems we all have to suffer a bit. Thus, I cannot easily argue against the President’s cry for salary caps, though I hardily disagree with the concept. In these times of excess by a selfish few, we all suffer because of this inevitable backlash.

We may need the President’s temporary salary cap to reestablish some sanity, some sense of fair play, and some sense of trust in all our markets, charities, corporations, and institutions.