A leader is someone who provides vision and inspires everyone around him or her to focus on the vision and drive toward achieving their goal. When things are not going well, leaders are often the first ones to roll up their sleeves and work alongside their people to make things happen. When confidence is not there, leaders encourage their people to continue their journey that ultimately enables them to achieve things they otherwise could not achieve.
In the global economy, each company is constantly adjusting its strategies to enable it to stay ahead of its competition. Their competitors are trying to inch closer to the leader and those who lag behind are doing their best to work their way up and try to chip at the lead. Cost management strategies are equally important, as the management of all firms is pressured to see how they can manage the cost to help improve the bottom line. To differentiate themselves from competitors, they need to find new ways of creating new product lines and managing their finances to improve the return on investments.
In corner offices across America, all CEOs are facing the same challenge to lead their organizations and outperform their markets. To ensure that they are accountable for the success of the company, pay for performance is instituted by most companies as approved by their stakeholders or shareholders. For example, Expedia’s Dara Khrosrowshahi: he will get options worth $30.4 million when he is able to push the stock price above $170/share. He is accountable for returning value to customers by driving the strategy to ensure returns for the next five years. Last year, Expedia stock returned 47 percent. However, Viacom shareholders lost 42% in the last fiscal period and their CEO, Philippe Dauman, made $54.1 million, a 22% raise from the prior year.
My point for this post is that there is a gap in leadership where poor performance cannot be rewarded, because it is done at the expense of the shareholders and the employees at large. As leaders of their respective organizations, they need to be held to high standards and their reward should be closely correlated to the firm’s performance. While the shareholders approved all these pay packages, their effect is only felt in the coming years. Just like performance review, it drives incentive pay. The same should apply to leaders of the companies, especially CEOs.
I understand the challenge and burden that the CEOs feel in running organizations; however they were put in that position because of their talent and capabilities to help shape the future of their organizations. Good leadership dictates that you get what you deserve; therefore the performance outcome of the company is the leading indicator to determine the shift in incentive compensation.
Doing the right thing is not just a saying. It is a good practice.