Published in CommPRO.biz 2013.07.18

Chasing the Bucks

If we are to believe the most successful investor of our time, the most important goal for any company is long-term growth. Why then do the directors of company after company follow a short-term path? Why would anyone focus on quarterly results? How many Americans watch the stocks in their 401Ks or other market packages rise and fall quarter to quarter? Why? Unless you are almost ready to hang up your spurs and retire, why do quarterly numbers even interest you? It’s the long term results that will support you one day, that’s the Warren Buffett way.

The only people who benefit from the quarterly rat race are those who collect fees from every trade. Trades and fees that reduce your nest egg, how does that make sense? This madness extends to the outrageous compensation levels “C Suite” occupants score these days. This, in spite of evidence that sky-high pay does not focus executives on the long-term health of a company; it focuses them on their paycheck and ways to fatten it up. Management guru Jim Collins pointed out in a USA Today piece a decade ago that leaders do not create great companies for a paycheck; they create great companies because they can. True then, true today.

A recent New York Times article on “C Suite” compensation notes that three Oracle executive’s compensation ranks them among the top five CEO paychecks. Among the top 200 CEOs the software company founder Larry Ellison is number one. His two Co-Presidents Safra Catz and Mark Hurd both have earnings that would put them into the top five if they were CEOs. Hurd, ousted from Hewlett Packard where he carried on the slash and burn route to profitability that his predecessor Carly Fiorina established. She was canned when her ham-handed style dragged this once great company down. Hurd collected over twelve million dollars on his way out the door for his role in destroying HP. For his leadership at Oracle Ellison saw his pay jump by a quarter last year. However, his shareholders suffered an almost equal decline. How does that make sense?

“C Suiters” should be well compensated, compensated for long-term strategies like research and development and real growth. Oracle Co-President Safra Catz lists 85 acquisitions completed within five years as an accomplishment. That is a strategy often followed by those looking to improve their quarterly gains. While acquisitions make sense when they fit, often they do not and can lead -as they did under Carly Fiorina at HP- to chaos and corporate decline. 

Flashy, pricy, “C Suiters” do not make companies great. Anytime their pay scale runs more than forty times the wage of the lowest paid worker in the company it’s way high. Today we have “C Suiters” routinely collecting a hundred, even as much as a thousand times their lowest paid worker’s take home. That’s just outrageous. It makes no sense as a business plan and it is ethically disgusting.

Don’t Close Your Hand 
                         on the Canary

Suddenly it’s October, and we are into the fourth and last quarter of 2012. This point in time gives us pause to examine why we are here; a time to remember that we are the canaries in the coal mine. Our job is to sniff out and head off the slightest hint of anything that might damage the reputation of our client(s) or our organization. The trick is earning a place of trust that gives us access to thinking and planning at the highest level. We need a place at the right hand of the CEO; a place where we can nip off reputation damage in the bud.

Over more than four decades in communications I have watched the consequences break bad when we lose our focus on this role. It never starts out as a big deal, just some little thing. An action that might escalate into a problem, but it probably won’t, so it’s easy to let it go. Anyway, every time you raise a point it challenges one of the other players and they may not see the danger.  It’s easier to let it pass, to close your hand on the canary.

A move that risks breaking the one rule that we should all have emblazoned on our conference room wall, Warren Buffett’s advice, “It takes 20 years to build a reputation and five minutes to ruin it.” Don’t allow anything stand in the way of your role as reputation guardian. I’ve had more than one client refer to me as their “Corporate Conscience,” and not always in a kindly tone. I even lost a client on one occasion when I raised ethical issues; never an easy outcome, but easier than losing a client because something that you let pass damaged or destroyed their reputation.

In recent years I have turned my focus to promoting the ethical business model. The idea that an organization that puts their employees, their customers, their vendors, their community, and the environment first has no need to worry about their lenders or their shareholders because the first five will assure them the best possible shot at profitability. Check out Firms of Endearment, a book detailing a study that shows that firms following those markers were eight times as profitable over a ten year period as the S&P 500 average.

Can anything guarantee profitability? Of course not, just that all things being equal you have a better shot if you follow the markers. It’s a message that resonates well and has given me consulting, speaking, and seminar opportunities, including an invitation to keynote a European Union banking conference on the Island of Malta. I even wrote a book, Play Nice, Make Money, that makes the case for an ethical business model as the most effective route to profitability. It’s a message we need to deliver to those entering the  business world, corporate communications and communications agencies. I welcome any chance to spread that message. Maybe we should all have a pretty yellow canary singing in our reception room to keep us focused on that message.