We Import Cars and Stereos, So Why Not CEOs?
Few cared when the jobs of “little people” left the country. But now the flight of jobs from the United States has moved beyond back-office functionaries to IT guys and legal analysts, and salaries that once put bread on middle-class American tables are paying for chapati in India. And, at last, more of us are starting to hear the screams of the outsourced.
Everyone who matters -- that’s Big Business and the White House -- seems to think nothing can be done about the giant sucking sound coming from India and China. The White House may want to forbid Americans to import prescription drugs from Canada, but it views the exporting of our jobs as simply the latest manifestation of free trade. Corporations with global reach agree. “There is no job that is America’s God-given right anymore,” Carly Fiorina, CEO of Hewlett-Packard, recently noted. “We have to compete for jobs.”
Fair enough. But why limit the competition to those who always take the fall for declining profits -- people who live from paycheck to paycheck? Why not widen the focus? If budget-busting tax breaks for business and weakened workplace regulations aren’t enough to ensure profits, maybe American corporations should consider outsourcing upper-echelon employees -- that is, CEOs.
Can an unknown from India or China function at the exalted level of an American CEO? Well, look at Ken Lay. If he’s to be believed, he has no idea what went on during his tenure as Enron’s top guy, and yet he took home $141 million from Enron in 2000.
Nor does a foreign-born CEO need any sensitivity for public relations. Consider Morgan Stanley’s chairman and chief executive, Philip Purcell. After Morgan Stanley paid a $1.4-billion fine for abuse of stock research last year, Purcell baited the government to take further action by telling reporters, “I don’t see anything in the settlement that will concern the retail investor about Morgan Stanley.” And yet this tone-deaf CEO’s compensation and options came to $23.7 million in 2002.
Indeed, with a few notable exceptions, what’s remarkable about American CEOs is how unremarkable they are. That’s no accident; the CEO is largely a ceremonial post. And that makes CEOs expendable. For much of the time, they’re not around -- they’re off at conferences, or attending to the business of other companies as members of corporate boards, giving secret advice to Dick Cheney or meeting with their lawyers to figure out a defense for their alleged crimes. For whatever reason, they don’t find their jobs terribly compelling; every few years, they seem to move on.
So by traditional standards of achievement -- intellectual horsepower, leadership and vision or even hours spent in the office -- it’s getting harder and harder to understand why corporate boards rush to shower huge compensation packages that average $10 million per man and the occasional woman. With some CEOs earning roughly 500 times the salary of their average worker, the most efficient way a company can save millions is with a single stroke of the downsizing blade right at the top of the org chart.
My bet is that Indian or Chinese executives would happily become American CEOs for salaries of $250,000. Would Indian or Chinese CEOs require millions of dollars in sweeteners? Not likely. And it’s equally unlikely that they would demand the grotesque going-away payments that are the final prize for departing American CEOs.
This won’t work with every U.S. corporation. But there is one company that has tripped over its feet to reward its chief executive: the Walt Disney Co.
Even the Sun King would marvel at Michael Eisner’s compensation: $737 million in a recent five-year period, or about 19 times the $38 million made by the average CEO in Forbes.com’s Annual CEO Value Survey. Disney, in contrast, has fared less well. In lieu of great new products, it has raised prices on already pricey crowd-pleasers. After launching its own city to great fanfare, it has recently sold it off. Now, just weeks before a shareholders’ meeting that will see dissidents crying for Eisner’s dismissal, he has failed to reach agreement with Pixar, a partner that could generate as much as 7% of his company’s total earnings per share through 2005.
And here is the beauty part: Although Eisner is closing in on retirement age, he seems to have made no plans for a successor.
Eisner is, in short, a CEO ripe for replacement by a low-priced foreigner. The savings in salary, bonus and options alone would make the Pixar deal affordable.
So when former Disney board members Roy Disney and Stanley Gold ask shareholders to bring them the head of Michael Eisner at their meeting next month, they will have an opportunity to do more than rid themselves of an enemy. They have a chance to usher in a new era in Fortune 500 CEOs.
Well, a brief era. For if Disney chose its bargain-priced CEO well, other companies would be sorely tempted to follow. But then would come an astonishing counter-trend: American CEOs voluntarily reducing their salaries in the interest of keeping their titles. Maybe even driving themselves to work. And -- who knows? -- maybe even doing a thing or two to help their employees keep their jobs.