Many Americans are desperate! So why did congress take extra days, during this time of urgency, to debate and ultimately link executive compensation to the current coronavirus bailout bill? With thousands dying and millions becoming unemployed why is congress debating the pay levels of less than one hundredth of one percent of our population?
Americans, like the rest of the world, face an unprecedented crisis that threatens our health, the lives of our most vulnerable and the foundation of our economy. Never before has the call for leadership been more urgent. Official reports place the United States 3rd in total confirmed cases, with the number of confirmed cases doubling every 4 days. The urgency of this crisis will never be greater than right now.
These unbelievable facts clearly place executive compensation among the most urgent issues facing our national leaders?
More Bizarre? Why Congress?
As a legal matter, federal and state laws make it clear that shareholders (through their boards of directors) determine executive pay levels, at least for the top executives, who then determine pay levels for all other employees. Many corporate pundits rightfully argue that recruiting, placing and compensating senior leadership ranks among the most important responsibilities of boards of directors. An entire industry of independent compensation consultants thrives as advisors to these boards, insuring a thoughtful and “market based” process.
So why is Congress, at this most urgent time, getting involved?
The most recent version of the coronavirus bailout bill prohibits any executive, of a company that receives federal funds, from making more than $425,000 per year for two years, retroactive to March 1st. Politically, this is an old story. Ten years ago congress adopted rules, enforced by the SEC, that compel companies to disclose executive compensation, including the ratio of the highest paid executive to the front line workers. Of course, thousands of headlines followed, highlighting massive disparities and apparent inequities. The politics of villainizing others, whether justified or not, merely distracts from the urgency of this moment
Sadly, These Stories and Acts of Congress Miss The Key Issue
Leaders, in all organizations, public and private, are responsible for results, including the welfare and engagement of those in their charge. For example our national leaders, at this urgent time, must place the health and economic well being of our citizens as their top priority. Our best leaders, who I refer to as Fusion Leaders, “fuse” their teams together around a shared purpose, placing the needs of their organizations above, or at least equal to their own needs. Wouldn’t that be comforting during this time of crisis?
For those interested in exploring the question “when does executive compensation become excessive” please reference my recent article in HR.com or my blog from March 4, 2020.