- High Compensation without Revenues—Now That's a Problem
- Money Is Not Everything—But It's Pretty Darn Important
- Whatever Goes Up...
- Return without Risk: Not Bad if You Can Get It
- Want Growth? Just Acquire It
- CEOs May Serve Themselves First
- Management by the Numbers: Executive Compensation and Shareholder Return
- Highest Paid = Highest Performance? A Look at Business Week's Top 20
- CEO Influence: Examples of Style
- Lessons Learned?
- Do Senior Agents Represent Themselves More than Other Stakeholders?
- Incentive Orientation: Things Need to Change
This chapter is from the book
This chapter is from the book
This chapter is from the book
Lessons Learned?
Poorly designed organizational compensation incentives are largely to blame for the problems experienced through much of the 1990s.26 Many of the individuals who were listed among Business Week's top paid executives were among our list of fastest revenue-growing firms during the same time period (or were involved in management impropriety). However, revenue growth (particularly growth gained through acquisition) did not lead to strong stockholder performance. Because acquired growth can accomplish an organizational overhaul very quickly, it is probably not surprising that this methodology has been subject to abuse. Ultimately, the shareholders lost, despite management's predictions that their organization might perform well with the acquired assets.27
Although acquired growth may not benefit shareholder wealth creation, it offers a path for senior management to create personal wealth. And, the bias toward creating deals may result, in part, from the short duration of CEO tenure. Given their relatively short stay at the top (i.e., three to four years), CEOs have great incentive to promote M&A activity or other transactions that will foster growth, facilitate a culture change, or manipulate a stock option harvest. Furthermore, given the large wealth transfer with M&A activity, many deals may also have been driven by pressures from investment bankers, venture capitalists, lawyers, and other financial advisors who would substantially gain from the harvest.