This is second of a three part article on CEO greed

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For almost 20 years corporate America has resembled the Wild West. CEO's and their executives, Wall Street bankers, and others have been quietly engaged terminating millions of jobs, stealing pensions, breaking up companies, committing fraud, outsourcing, and engaging in incomprehensible risk taking, all for the purpose of outrageous personal gain. This is the second of three articles that will explore the cultural, psychological and psychodynamic motivations for this behavior.

(This is the second of a three part series )

Enter the Finance CEO's

All professions go through evolutionary change over time. Over the years disciplines were favored and valued among corporate boards. There was a time when engineers were valued, then marketing and then the finance people moved into the top positions as the discipline of choice among CEOs. As finance trained executives represented a new group of CEO's B-schools jumped on the bandwagon. Professors of economics and finance climbed to central positions in business schools and substituted the words of "self interest" and "incentive to profit" for "greed." The Ronald Regan concept of "trickle down" economics prevailed, and promoted the belief that allowing the wealthy to "have more" would be good for the economy, and if the rich got richer, their wealth would benefit the lower classes. In the face of such odds, more of the nation's pool of talented students decided there was no point in becoming a doctor or an engineer, when one could be a banker. During the heyday of business school growth, 1970 to 1990 Harvard graduates who entered finance career jumped from 5 to 15 percent while those going into law and medicine fell from 39 to 30 percent (Goldin and Katz, 1999).

Before 1980 one rarely saw an MBA in manufacturing and it was even rarer to find someone with an MBA in finance running a manufacturing plant. But in the 1980's and 90's things changed dramatically, as MBA's entered manufacturing, not as blue collar supervisors but as CEO's, with ties to banking, hedge funds, and Wall Street. These finance trained MBA's managed over a 20 year period; to destroy American manufacturing, severely injure retail and almost destroyed the economy.

How did they do it?

Scheiber (2009) uses the American automobile industry as an example of how they did it. He says that when they took over the reins, "these (finance) executives were frequently numb to the sorts of innovations that enable high-quality production at low cost." However, it was not numbness that led to bankruptcy. The failure was a function of a combination of greed, loyalty, and what they knew, their discipline. They followed the dictates of their discipline and the stockholders who hired them. Consequently they focused exclusively on increasing the "bottom line." The union leaders called them "bean counters" who were only concerned with the numbers. They had no investment in the company other than what it could do for those who hired them. Their loyalty was to the stock holders, hedge fund companies, banks and corporate raiders. In addition for these finance trained MBA's, numbers were their friend and people (employees) were their enemy.

Consider this- When the marketers, designers, and engineers ran the automobile industry their sails were full. They knew the market and what types of cars would sell. When the finance CEOs took over they put GM on the road to bankruptcy. Why? They did what they knew best, they followed this "bottom line" approach and they created the most cost efficient method to run their companies, it was called "spreadsheet management," and later on called "dashboard management." Roger Smith ran GM from 1981 to 1990 with an MBA and a heavy background in finance. Smith was categorized as the evil Iago in the documentary "Roger and Me." He was the first of the finance people sit in the catbird seat at GM. He showed little concern for the company, and absolutely no concern for its community or employees. He started the outsourcing and offshoring movement that led to the termination of 30,000 employees and the destruction of the once proud city of Flint, Michigan. Smith was followed by Rick Wagoner and Fritz Henderson both finance CEOs who made certain their stockholders and their executives got rich as they destroyed the company. This pattern was not unique to the automotive industry; financiers were a plague to all manufacturing industries.

With a combination of sophisticated compensation consultants, a background in finance and little knowledge of the industry they were expected to lead these CEO's focused on cost cutting: the termination of employees, closing of factories followed by outsourcing, and offshoring, and they avoided spending for R&D and long range objectives. It was their formula to get their stockholders, hedge funds, Wall Street bankers and of course themselves wealthy. At GM consultants designed compensation packages so that their clients; CEO's and their stockholders could reap short term bonanzas. According to Jacoby (2008), in the early 1990's after executive compensation was heavily tied to stock ownership and options the promised bonanza was delivered. Between 1996 to 2000 GM delivered more than $20 billion to shareholders, $13 billion in multiple repurchases and $7 billion in dividends. He maintains that if GM had used that money for research and development it would not be in bankruptcy in 2009. In the process GM's CEO, Rick Wagoner became a rich man. In 2007 he received a 42 percent increase in compensation, to $6.6 million and added $4 million to his retirement plan, while his company lost $38.7 billion. GM President Fritz Henderson received a 44 percent raise, and Vice Chairman Bob Lutz a 36 percent raise in compensation for 2008.

Before these guys looted the company GM sold half of all cars in the US, now it sells 20 percent (Lowenstein, 2008). But who really suffers as CEO's get rich? In July 2008 GM got the United Auto Workers (UAW) union, to eliminate health care coverage for salaried retirees over the age of 65. It planned a new wave of buyouts among its 32,000 salaried employees while freezing their salaries for the remainder of 2008 and 2009. Since 2000 GM has terminated 13,000 white collar jobs and 40,000 union jobs (NY Times, 2008 a). In July, 2008 another 1,760 workers lost their jobs as GM closed two truck plants (Vlasic, 2008). In the second quarter of 2008 GM reported a $3.3 billion buyout of 19,000 hourly workers. Despite losing $30.9 billion in 2008 Wagoner made over $14.9 million, $3 million in cash and $11.9 million in stock and options that plummeted to $682,000 in value as of March, 2009. Since 2006, Wagoner's company has lost $82 billion. Under Wagoner's leadership, GM lost tens of billions of dollars, took billions in taxpayer-financed aid, and cut tens of thousands of jobs, including terminating another 47,000 employees in 2009. He retired (fired by Obama) in 2009 and walked away with a retirement package of $20 million.

Since 2000 more than half of all American CEO's compensation packages consisted of bonuses and stock options. These CEO's saw their only objective as "maximizing short-term shareholder value" and then "get the hell out of Dodge." What these CEO's did not learn in B-school were the consequences of their cost cutting/short term strategy and the hurt they could inflict on men, women and children throughout the country.

Home Depot is another example of how "number crunchers" ruined a company while enriching themselves. Bob Nardelli a numbers executive from General Electric with zero retail experience was recruited by Board Director Ken Langone an investment banker. Nardelli's compensation package was negotiated by Dennis Donovan a lawyer and his long time GE compatriot. During Nardelli's five years at Home Depot he earned about $200 million in salary, bonuses, stock, stock options and other perks. When he was fired he received an additional $210 million to go away. Nardelli rewarded Donovan by making him the highest paid HR VP in history. Donovan also negotiated a contract for himself where "cessation of a direct reporting relationship with Mr. Nardelli" gets him $15 million to $20 million, plus retirement benefits, stock options and compensation already earned.

While Nardelli and Donovan were looting the company he gave his hourly workers salary increases that ranged between 10 and 75 cents an hour. During his 6 year tenure the company's stock fell 7.9 percent while the stock of its competitor Loews increased 188 percent. He was such a bad manager that during his tenure he managed a 100 percent turnover of all 170 of his top retail executives and then replaced them with ex-GE and military people. After Nardelli left, Home Depot continued to slide. In 2007 profits fell 24%, however, his replacement Frank Blake a GE alum received a $500,000 bonus, in addition to $8.28 million in compensation. Under Blake, in January, 2008, Home Depot announced a 10% cut in employees at its headquarters in Atlanta, Georgia. In April, 2008 he announced another cut, the termination of 1,000 in-store human service managers, and the closing of 15 stores and another termination of 1,300 employees as its revenue decreased 7.8 percent, same store sales dropped 8.7 percent and profits dropped 34 percent. In January, 2009 he announced an additional termination of 7,000 employees and he closed Expo and HD Supply and more stores and Home Depot stock dropped 34 percent, and guess what?--Blake gets a 29 percent increase in compensation.

Like Nardelli, Blake, and other CEO's they hire the best consultants to make certain compensation packages have reachable goals or targets that will enrich executives. There is wide spread belief among academic researchers and business writers that CEO compensation should be aligned to corporate performance however, the counter argument is this will reward short term profitability. Consequently I found that current compensation practice results in short term bottom line results (like GM's) where CEO's push their employees to take short-term risks with little regard for the long-term effects. This view became particularly visible during the crisis of 2008 and led to a movement by business writers, politicians and others to suggest that CEO compensation should be changed to consist of restricted stock and other forms of long-term compensation designed avoid rewarding short-term performance. But compensation consultants have made sure that this was a "toothless tiger." According to Cooper, Gulen and Rau (2009) this proposed system of compensation implies a positive relationship between long-term incentive pay and future firm performance. In fact they discovered the higher the CEO long term compensation the lower the shareholder returns. In addition, there is ample evidence showing that the pay of a CEO has little or no relationship to how well a company does. As a matter of fact I are beginning to see studies suggesting there is an inverse relationship between CEO compensation and shareholder earnings, that is, the higher the CEO's long term compensation the less shareholder return. In agreement Bebchuk (2009) found that more a CEO's compensation increases the lower the company's future valuation and market valuation. Other research concluded that CEO's who average $24 million in annual compensation left their shareholders poorer by an average of $2.4 billion a year. This means that compensation consultants and their lawyers draft complex contracts containing an array of metrics to legitimize outrageous compensation with an eye towards sweeping it by a board of directors who are often "asleep at the wheel" and where conflicts of interest are rampant. A sure sign that something is amiss is when the boards give their CEO's guaranteed bonuses.

Terminate Employees and Get a Raise

There are some writers who believe there is some special form of psychopathology at play with a CEO who makes millions, if not billions, as they engage in massive layoffs. They believe that there are very few people in the world capable of engaging in this work and then sleeping well at night. I doubt it. What these writers lose sight of are the bonds that exist among members within the executive constellation and the powerful culture that has been created over time. Collectively their B-school education, corporate training and preparation, and the actual climb up the corporate ladder creates a condition where the practice of "management" takes on a specific function. The truth of the matter is no one knows how to manage a corporation and leadership cannot be taught. What I do know is the field of management is beset by "best practices" and whatever is in vogue (go to the business section of any bookstore). I also know that executives are copy cats and they carefully study what other top or celebrity executives do. So where did this present form of "management practice" come from where executives came to believe it is acceptable and even good management practice to obtain a raise while terminating employees?

In the early 1980's I witnessed two significant changes among those who ran America's major corporations. Terminations moved from becoming a decision of "last resort" to a decision of "first resort" (Kochan, 2006), and at the same time CEO pay packages began to dramatically increase. In agreement Hickok (2008) maintains that during the period between 1980 and 1995 record layoffs occurred, for example during 1980's layoffs accounted for 9 percent of the adult population in the U.S. At the same time senior executive salaries increased more than 1,000 times. Also in the early 1980's business strategy textbooks began to teach MBA's the benefits of "workforce reduction."

In the late 70's and into the 80's eight important strategies were promoted by business schools, and business writers.

1. The integration of layoffs as a strategy to boost earnings. In many cases, the use of terminations as a strategy went from being a CEO decision of last resort, to first resort (Uchitelle, 2006). It was given wording that neatly fit into managerial glossary, with the popularization of words and phrases like downsizing, restructuring, reorganizing, transformation, redesign, rightsizing, staff cuts, early retirement, cost reduction, managed redundancy, and lean and mean. It was in early 1980's that downsizing first appeared in Business Schools strategy textbooks and accepted as sound business practice. In the late 1980's Human Resource departments accepted the concept of "human capital accounting" where employees were now treated as a "resource" and HR more like finance.

2. The employer/employee compact ended. No longer could an employee expect the security of staying with a company for their career and to be taken care of after retirement. CEO's bought into the "lean and mean" metaphor, promoted by consultants and business writers. Strategies were put forth that suggested it was optimal to have a flexible workforce, expanding in good times, contracting in bad. Essentially, it meant one could reduce the work force and get those who remained behind to work harder, longer hours.

3. The reduction of the work force led to change in the hours work. It was during the 1970's that a trend toward a decline in work hours ended. From the early 1900's to the 1970's, (except during the Second World War), hours of work declined for most Americans. But around 1970, the share of employees working more than 50 hours per week began to increase. The increase in hours an employee worked began a steady increase, 25-to-64-year-olds who worked 50 or more hours per week rose from 14.7 percent in 1980 to 18.5 percent in 2001, and continued to climb. This has created a situation where employees work longer hours than any time since the industrial revolution. In 2007, employees worked a half a day more each week than they did in 2002, and a day more than they did a decade ago. In addition, one-third of American employees do not take their 10 days of paid vacation offered by their company, leading to a vacation deprived workforce (HR.com, 2006).

4. An increased emphasis on mathematical and statistical modeling entered business school curriculum. During the early 1970's, business schools deans, in their zeal to build their schools and seek favor among the science community, rushed to hire Nobel Laureates and in doing so added applied mathematical modeling to an ever increasing array of financial and business problems. Decision analysis and decision modeling became widespread, assisted by sophisticated computer technology. The days of preparing a manager to be responsible and compassionate ended.

5. Critical thought and diagnosis was virtually removed from the curriculum in favor of an approach that emphasized formulation and implementation in the so-called decision science's which found a strong place in business school curriculum.

6. Professors of economics and finance climbed to central positions in business schools and substituted the words of "self interest" and "incentive to profit" for "greed." The Ronald Regan concept of "trickle down" economics prevailed, and promoted the belief that allowing the wealthy to "have more" would be good for the economy, and if the rich got richer, their wealth would benefit the lower classes. In the face of such odds, more of the nation's pool of talented students decided there was no point in becoming a doctor or an engineer, when one could be a banker. During the heyday of business school growth, 1970 to 1990 Harvard graduates who entered finance career jumped from 5 to 15 percent while those going into law and medicine fell from 39 to 30 percent (Goldin and Katz, 1999).

7. Increasingly university presidents are turning over their business schools to millionaire equity investment executives. Kenneth Freeman was offered the deanship of Boston University's B-School. He is from KKR, and his job was to oversee all of the firm's private equity investments around the world including serving as director of hospital operator HCA, medical device maker Accellent, and building products manufacturer Masonite. In addition to his deanship Freeman will continue his affiliation with KKR as a senior advisor. In another example Pace University's president appointed Neil Braun as their dean effective July 1, 2010. Braun, a lawyer, has 30 years experience in media management positions most recently as president of the NBC Television Network and CEO of Viacom Entertainment. B-schools seek these finance moguls to serve as celebrities who will increase the schools visibility and of course bring in "big bucks." They want produce a David Tepper who made $4 billion in 2009 or a billionaire celebrity politician like Mitt Romney. They were the student's heroes and B-schools and their faculty made their conquests into case studies.

8. It was no longer considered good management practice to balance the interests of the shareholder-management-employee triangle. Executives were taught to focus on a single objective, the shareholder. They were motivated to maximize profit, and the "bottom line" became a popular metaphor. According to CEO Thomas Wilson, Allstate's corporate mission is clear: "our obligation is to earn a return for our shareholders." (DiCello, 2008). Employees and insured's (customers) are not mentioned. The new celebrity CEO's were called "neutron Jack" and "Chainsaw Al", those who cut cost (terminated employees) and made their stockholders happy and in turn were aptly rewarded for a job well done.

Rennie (2006) was the first to investigate CEO's benefiting as they terminated their employees. She compared CEO's who terminated employees and those who did not. She discovered CEO's who terminated employees obtained greater increases in compensation then those who did not terminate employees. She studied 229 firms that terminated employees at least once between 1993 and 1999, and found that in the year after layoffs occurred CEOs of these firms received 22.8 percent more in total pay than CEOs of firms that did not have layoffs. Rennie (2006) also discovered that the year layoffs occurred CEOs of layoff firms received 19.6 percent more stock-based compensation than CEOs of non-layoff firms. This stock based enrichment increased significantly over the years following layoffs. One year after layoffs, CEOs of firms that terminated employees received 42.6 percent more stock-based compensation than CEOs of non-layoff firms. Two years after layoffs, that percentage rose to only 44.9, but jumped to 77.4 percent after three years. Research by the Policy Studies Institute confirms this, suggesting in 1996, that CEO's who laid off between 2,800 and 49,000 employees received an average salary increase of 67 percent (Leondar-Wright & Cavanaugh, 1997) . The average increase for all CEO's in 1996 was 39 percent (the average increase for all workers was 3 percent). This trend is confirmed by the Institute for Policy Studies (2010), they found that the CEOs who terminated the most employees during the recession were also the CEOs who took home the biggest pay checks. They found that the CEOs of the 50 U.S. firms that slashed the most jobs between November 2008 and April 2010 took in 42 percent more than the average CEO at an S&P 500 firm. They also found that 36 of the 50 layoff leaders "announced their mass layoffs at a time of positive earnings reports," suggesting a trend of "squeezing workers to boost profits to maintain high CEO pay."

They do this knowing that cutting workers will only boost short-term profits but this practice appeals to Wall Street moguls. But they also do this knowing that over the long haul downsizing doesn't always lead to increased profitability, or even lower costs. When companies terminate employees or force employees to take buyouts they often lose their best workers and those who remain are demoralized and cynical. And as was witnessed with GM, spending on R&D drops limiting opportunities future revenue and growth potential. But they do not care.

In 2008 America entered an economic recession, with some referring to it as the worse since the great depression and 1.9 million American's lost their jobs. However, this did not stop CEO's from lining their pockets. In 2008 only 20 percent of all the corporations who terminated employees were led by a CEO who took a reduction in compensation and a whopping 80 percent either received a raise or their pay stayed the same. How did they do it? or How did they get away with it?

How They Did It? Get me a Consultant who can Guarantee "Mine is be Bigger than Yours"

Let's begin with a basic assumption that in a corporation no one is worth 400 or 500 times another person and when a CEO makes 400 times their lowest paid employee it lowers morale, creates cynicism, increases theft and sabotage, and lowers productivity. So why do they do it? Transparency allows CEOs to know what other CEO's get and it creates what I call "compensation envy."

Consider this question: Why do companies try to keep knowledge of employee compensation secret? Every HR manager knows why. To avoid envy, conflicts, and demands for more. This has been practiced for years and HR and payroll departments typically have policies and rules to maintain confidentiality and in some corporations discussion of compensation can be grounds for immediate dismissal. Most companies require that their employees keep their compensation secret and they are typically told they are not allowed to discuss their salary with anyone else in the company. On the other hand managers and supervisors know what all of their people make and they have a distinct advantage when review time and annual salary discussions occur. How can an employee negotiate compensation when he/she has no comparison, that is, they do not know anyone's compensation? Management wants it this way. In many companies employees spend time guessing what others make. They look at how employees and colleagues dress, where they live, the quality of their car and general lifestyle and departments are rife with rumors that can create debilitating envy and hate.

But this is not the case for the corporation's officers, they not only have comparisons, they have consultants who provide them with ample industry data on executive compensation. It turns out that compensation transparency is a toxin for those who want to reign in pay. Like celebrities contemporary CEO's now have agents, called compensation consultants. In the celebrity world of show biz, professional sports and publishing, agents love to announce a big payday for their clients. It keeps moving the bar upwards and their 10 percent cut grows bigger. I have not heard of a compensation consultant getting 10 percent of a CEO's package but the day will come. Already compensation consultants identify their client base on their web pages and they want a reputation of negotiating big contracts for their clients.

CEOs have been accused as a group of having their compensation systems rigged by these highly paid consultants who do things like structure guarantees that their clients will obtain a handsome bonus no matter what the company does. In addition they putting in place bonus systems that only rewards short term goals and cost cutting.

The work of compensation consultants is to report to the CEO and the Corporate Compensation Committee comparative salaries. Several studies suggest that corporate size is the most significant variable in determining CEO compensation accounting for as much as 40 percent of the variance. Consultants assess every imaginable perk from tax advisers to club dues to home security systems. The question arises: What is the function of this research? From a psychodynamic perspective it serves to give the CEO a degree of security in the world of CEOs that they are not weak, or any less than other CEO's and if they become compensation leaders in their industry then they can feel all powerful. This need for more pertains to the CEOs entire compensation package, not only salary and stocks but an array of perks. Many claim this type of thinking leads to runaway compensation. For example when the compensation consultant reports that some CEO "leapfrogged" other CEO's this shakes the system and now other envious CEO's will want to jump up the compensation scale to either catch up or move ahead. This promotes compensation escalation. It is in their best interests for these consultants to promote envy, jealousy and competition. CEOs have their compensation ranked in business magazines newspaper they can see where they stand. To be ranked low is considered a sign of disrespect and failure and weakness and when this occurs they spend inordinate amounts of time trying to catch up and move up in the compensation rankings. CEO compensation is also an issue among executives within the same corporation. Executives want their boss to be a "top banana." If their CEO's pay is in the top five categories then the VPs expect to be in the VP top five. These executives may work in corporations that forbid disclosing or discussing compensation but not in the executive suite, considerable time is devoted to compensation issues and careful assessment of the compensation updates in their professional skill areas given to them by 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.

Becoming a Multimillionaire Executive

Here is a simple question: Can an executive who becomes a multimillionaire still manage? Or, how does excessive concern with compensation impact the executive constellation and their capacity to manage? Most executives not only push for compensation packages and think they are fair and justifiable but they also want packages that will set them and their family for life. However, I found that when they achieve their goal and have the big pay day their world changes. Here I see the reason for an inverse relationship between excessive CEO compensation and poor long term corporate profitability. There are many jokes and even TV commercials deploring how difficult it is for a stockholder to get in contact with their millionaire stockbroker, and there is an element of truth to this. When these executives become multimillionaires they are now preoccupied with their own wealth management and they pay less attention to the ship they are captaining. There are some research studies that look at factors that contribute to declining company stock and they all have one thing in common, a CEO who is distracted. Decline in corporate profitability is associated with CEO's: who are building a new home, going through a divorce, dealing with physical and mental illness, and of course obtaining great wealth. These studies suggest that when the CEO is preoccupied and cannot devote the necessary time and energy to managing the company, the company suffers. I found that not enough time is given to careful decision making and if we couple paucity of time with grandiosity then quick thoughtless decisions have the potential to bring ruin. I find evidence of this with two retail giants Home Depot and Circuit City.

Bob Nardelli entered Home Depot as CEO in December 2000 and was paid around $28 million and soon began to build a mansion in Atlanta. At the same time he decided to institute cost-cutting measures. He cut fulltime jobs, capped wages, and recruited former military officers to run the stores. Staff morale and customer service began to collapse under his new regime. The number of part-time employees skyrocketed from 26 percent to as high as 50 percent in 2002. In addition, he replaced many experienced store associates who made high hourly wages, with inexperienced part timers (Alic, 2007). His overpaid executive constellation, using data from Six Sigma discovered that there were many senior and experienced store associates making upwards to $28 per hour. A cost analysis pointed to the cost of these salaries and the savings the company could obtain if the high priced sales associates were replaced by $10 per hour part-timers. Home Depot veterans were horrified of the consequences of the plan; understanding the brain drain, the impact of the loss of experienced sales people, and how their absence would negatively impact customer service. But they remained quiet and only shared their thoughts with trusted colleagues. Some did suggest doing a pilot study. However, this type of thinking was rejected. In the face of overwhelming evidence, Nardelli came to believe that profitability and share holder value would increase if they fired the high priced full time hourly associates in their stores. He made his decisions and in the first two months there was elation as the bottom line improved and profits rose. Then disaster struck and customer service rapidly dropped and the stocks began to slide. In 2005 Home Depot slipped to last place among major U.S. retailers in the University of Michigan's annual American Consumer Satisfaction Index. It is doubtful the company will ever return to its former days of quality customer service.

In 2003, Philip Schoonover the CEO of Circuit City did something similar. The second largest electronics store in the America switched employees from commission- based pay to hourly pay and then he fired 3,400 of its highest-paid hourly and most experienced sales employees and hired inexperienced replacements willing to work for less. Like Home Depot, quality customer service turned from good to bad overnight. In November, 2008, Circuit City announced that it was closing 155 stores and terminating 7,300 employees, and amid financial troubles declared bankruptcy. Schoonover, who resigned in September, 2008, was paid $8.52 million in fiscal 2006 and his severance package is estimated at $1.8 million. In January 2009, Circuit City announced it was closing all of its stores and going out of business. Schoonover's executives asked the bankruptcy judge for permission to pay up to $4.65 million to "incentivize" them to stay and help shut down the company (Iosco, 2009).

The foolishness of these decisions made by newly minted multimillionaire executives brings three interpretations to the fore: (1) This first interpretation falls into the category of "Wild Analysis" and it goes something like this: Just as one can be unconsciously motivated and capable of ruining their health, marriage, career, etc. one is just as capable of destroying a corporation. (2) Sudden wealth can bring forth a heightened sense of assuredness, feelings of omnipotence, and perhaps self righteousness. Couple this with (3) a new preoccupation in the executive's life, i.e. wealth, and entry into new social circles brings forth a new set of issues and problems that makes the day to day management of the corporation difficult. The newly minted millionaire CEO is preoccupied and removed from the people he/she works with on a daily basis. Given these changes one could understand how these foolish decisions can occur.

This may explain why many CEO's increase their compensation as they terminate their employees. For most people terminating employees will fill them with angst and to obtain a reward would be unthinkable. Not these people, they are too emotionally disconnected.

Why do CEO's receive handsome increases in compensation no matter what they do? There are several explanations. First is a psychodynamic assessment, it is concerned with the wish to maintain the illusion of success. Second is associated with the short stay at top. The third is associated with living in the CEO's world.

The Illusion of Success, Entitlement and Vitality

The gratification associated with the act wealth and entitlement allows CEO's to experience a sense of vitality. Unconsciously the CEO wishes to become the clean handsome successful boy of his mother's dreams, not the dirty angry revengeful kid who was disliked. The question is- How? By linking getting more with vitality. Vitality defined as being alive in the physical and psychical sense. But for the CEO, the vitality obtained from the money and the accoutrements it brings, as well as his celebrity status never lasts very long and CEO's shift back and forth between the brooding angry child flooded with guilt, and the happy gratified CEO. Thus the need for more must continue, like the obese person who must continually eat. The vitality is like a rush, an addiction, and when CEO experiences vitality it is as if he/she is whole and omnipotent and both inside and outside the corporation these have attained celebrity status, they surround themselves with admiring people who are required to heap praise upon their "king or queen," and they publically give to charities for additional self gratification.

It's the creation of illusions that feed the CEO, and one of these illusions is "I'm entitled". Chasseguet-Smirgel (1985), states the illusion of entitlement has greater relevancy for group cohesion. Freud (1921) argued that the authority of the group, in this case the executive constellation can allow forbidden greed. This occurs when the executive constellation creates an illusion of their self importance and power. Obtaining large amounts of money, terminating employees, and engaging in immoral acts can reinforce this illusion. The internal controls like guilt is lost and conscience is externalized and control is, "out there" contained in an incompetent group, like the SEC or unions. An attitude prevails in the executive suite that greed is permitted, and no one will be punished because they are too brilliant, too perfect, too important, and privileged and have too many friends in high places to be punished by any authority. Furthermore, it is they, the executive team that does the punishing.

Now we can see the motivation to engage in high risk situations. It is the high risk situation where the executives celebrate their prowess. These situations are antidotes to the fear of failure. Consider what occurred in September, 2008 when Wall Street was collapsing and thousands of executives were losing their jobs, and restaurants, retail and limousine services were all noticeably empty, except for one industry; the strip clubs. According to Arango and Creswell (2008), during this period the strip clubs were filled with stock brokers, bankers and foreign businessmen. At these clubs executives could continue to flaunt their power, paying thousands of dollars for Champaign in private rooms. As Wall Street looses billions, and executives experience fear and humiliation, they flock to the clubs where they can maintain the illusion of superiority. They do this in the manner that is consistent with depersonalization, anonymity, no emotional attachment, or empathy. Like the person who takes his sex vacation to engage in anonymous sex. Also, in a remarkable way this activity offers the vitality the executive needs. What is this vitality? It is the risk, "the game or gamble" they need to experience. When the take the risk and succeed they are omnipotent, on top of the world, mothers favorite. When they fail it is not their fault they blame someone else and go to the strip club. The sad downside of this need to demonstrate prowess and take risks are that they can destroy things; a company, investments of clients, marriage and family. The question is why? Is it a corporate culture where executives must play the competitive game of "mine is bigger than yours" or is the chronic fear associated with loss, humiliation and failure. Much has been written about narcissistic corporate cultures and the fact that image is perhaps more important than who one really is, that is, looking good" is more valued than "being good" Given a culture that values image, the executive must establish and marinating this image and compensation has a direct relationship to image. CEO's like other celebrities believe they are worth millions because they engage in work and behaviors and have talents that no one else has. Like celebrities these CEOs have their own entourage, they are called Vice Presidents.

Achieving significant compensation maintains the illusion of success. Most people would experience guilt and failure if they terminated employees, not these CEO's. They have devoted their life pursuing success and for them the phrase "failure is not an option" is real even if it means denial. There is another reason CEO's will pursue wealth and this has more to do with the reality of occupying the CEO position.

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)

Authors Bio:
He has taught in MBA programs for almost 35 years in 2002 he left academe to work for Home Depot where he witnessed the absurdity of corporate life. He is now semiretired and serves on the faculty as an adjunct professor at several institutions. He holds a doctorate in psychology from NYU and completed two postdoc's: The Institute for Social and Policy Studies at Yale, and the Post Graduate Center for Mental Health in psychoanalysis. He is a member of a unique group of scholars and consultants who apply psychoanalytic thinking to organizations. He has written two books and is writing his third, an attempt to understand executive greed and self-destruction.