Short Stay at the Top
Consider the climb to the top of the corporation. To make it to this position is a Herculean feat that many attempt and few obtain. Most CEO's who are males either have doting care taking wives who make enormous sacrifices to support their man on their climb or they reach the top with a trophy wife on their arm. Most CEO's will admit they failed their family they did not see their kids grow up and sacrificed family for career. Over the years I would carefully lay out the sacrifices one must make to climb the corporate ladder to my part time MBA students and between 70 to 90 percent said it would not be worth it. What are these sacrifices? They must be willing to work long hard hours, be in the right place at the right time, be exceedingly competitive if not Machiavellian, and have extraordinary luck. When they reach the top the CEO must not only have the capacity to be a workaholic but must also have the unique capacity to spend 16 hours a day multi-tasking. These multiple tasks often have little relationship to each other. Multitasking is especially apparent when the CEO is leading a conglomerate or global business. In these businesses, multi-tasking may involve several different industries, languages and cultures. Unlike scientists, scholars, surgeons and other professionals who must concentrate for long periods of time on a single task or goal, CEO's must move quickly from situation to situation, handling scores of disconnected events each day. In addition, with world financial markets running 24 hours a day, the CEO must continuously pay attention to the impact these markets may have of his/her corporation, and this often includes even the most remote corners of the globe.
How long can they do it? Not long. The average length of stay at the top has been decreasing, from 11.4 years in 1980 to 8.6 years in 2000 (Klein, 2007) and 3.2 years in 2007 (New York Times, 2008b). While we see the length of stay drop significantly, so has the age. The CEO "class of 2004 was the youngest on record, with an average age of 57.8 years. With a young age and short stay these CEO's have been called "The most prominent young temp workers".
Some of the reasons for such a short stay at the top are attributed to burnout, retirements, resignations and failure/terminations. With the average length of stay at 3.2 years these CEO's barely have time to impact the corporation before they leave. What we have is instability at the top caused by this revolving door. The brief length of stay strongly suggests we have weakly committed CEO's who's chief aim is to "fill their personal coffers," with little concern for their employees. Long gone are the days when a beloved CEO personally knew all their employees and symbolically "bled" when his company "bled." Gone the days when a CEO retired at 65 with a gold watch and a happy sendoff into retirement. In addition, if the average age of a CEO is 57 years and they only stay a few years they will feel the need to accumulate enough riches to keep the house, country club and the life style. When the government stated that bailed out CEO's could not earn more than a million a year several executives said it was not right that executives and their families had to make such a radical adjustments. There is ample evidence that CEOs seek to use their position to become wealthy and to have a golden retirement package that will keep them financially fit for life. Consequently for many CEOs obtaining wealth becomes a preoccupation and they spend countless hours with compensation consultants and financial advisors and board members to structure the best deal.
When the short stay in the top seat is over and they leave chances are that most will never work again. However, there are a few who are recycled. Some researchers suggest these recyclable CEO's possess a particular style or brand that makes them hot for corporations in certain states of repair. The turn-around artists is one popular brand of a CEO, there are others who take over corporations on their death bed and split them up to ensure survival, there are still other CEOs who function as "undertakers" and bury their companies and there are others who have a powerful Rabbi and it does not matter what they do, succeed or fail, they reappear The recycled CEOs are uncommon and by far the large majority go off to the CEO "graveyard" perhaps seeking or buying some B-School appointment but most retire to the golf course, and reappear at charity events where they are forever introduced as the "former CEO of ""
These unemployed CEOs could certainly seek a "head hunter" and explore the possibility of employment but for most this is unthinkable. To go through an interview process would be humiliating not only for the candidate but for the company they left. These departing CEOs like to believe that they have some type of emeritus status and many are actually given an office, assistants, limos and use of the corporate jet, and some remain in the loop by being offered consulting work and serving on boards of profits and nonprofits. Some become so entranced with their wealth that some they join investment companies while others set up foundations.
The CEO revolving door sets up a culture in the executive constellation where everyone gets a turn. Many in the executive constellation believe that each will get a turn at the top spot and earn fat compensation before they depart. For these executives it is not only getting a chance to run the company but a chance to get rich. This contributes to the creation of a culture that is self-centered and primarily concerned with the bottom line. These are not entrepreneurial "institution builders" but calculative executives who lead by numbers. They cannot see beyond the bottom line and any strategy they develop rarely goes beyond a few years. In addition, as we have observed these newly minted millionaires are distracted and preoccupied with their wealth. Their objective is ride out their time and receive the "meal ticket" for life. This means that if one is in their late 50's and know they will be out in a few short years they will make certain their compensation and severance package will last a life time. It's somewhat similar to the old union rules or rules that many government have that gave a retiring worker 70 percent of the average of their final three years salary, needless to say the worker virtually lived at the job their final three years often retiring at a salary greater that they earned before retirement. The belief was-they deserved it. The same is true for Boards of Directors, compensation committees and compensation consultants.
In a way this explains what is decried as greed, but there are other factors that fit into the compensation equation for these CEO's.
We maintain that once an executive obtains millions their thinking undergoes a major shift and their capacity to make sound and reasoned managerial judgment is lowered. As with any occupation where an individual has so much money he/she no longer has to work their attitude towards work changes, they may become more detached and less involved; they are now multimillionaires and they live and function at a new level of society.
(Part three will be posted next week)