observation of the day: people power

“A wave of shareholder activism is shining light on ….” – subhead in The Guardian

“A new kind of outrage: Investors kick out against inflated pay packages” – headline in The Economist

So.

The issues America (and many countries) is having at the moment are complex but I wanted to make an observation of one thing … how everyday people can make a difference.

The topic? Leaders pay is out of whack.

I believe since the 70s the pay discrepancy between the top, middle and bottom has increased exponentially while overall company performance has not matched the shift. In addition. There seems like there has been a mindset shift.  It is a little difficult to quantify but leaders in the 70s had a stronger philanthropic attitude as well as “taking care of others with my high earnings” attitude.

All that said … let me begin by defending leaders (a little).

First. The greater good.

While we would all like to believe we have an inner ethics compass we know for sure we all have an inner survival compass. Leaders are no different than the rest of us <albeit they earn exponentially more than us>  in that there is such a sense of job insecurity these days it is really difficult to look beyond “self” for the “greater good” when you don’t know if you have a job tomorrow.

Second. CEO (or leaders pay).

Look. I have managed a couple of companies and I have no issue with a leader getting paid gobs of money. Until you have been in the shoes it is difficult to understand the incredible day in and day out pressure (does anyone ever notice a president enters office with no gray hair and leaves with a head of gray hair) and the fact that while no matter how well you delegate responsibilities every day you are making at least one decision every day, yes, every day … that could impact the future of the company (impact being profitability to complete failure).

Oh. And if anyone truly believes that a leader doesn’t realize she/he are managing people and the hard decisions they make impact people’s lives, they are nuts. The truly callous leader is a small minority. The majority are constantly weighing the benefit of the many versus the pain of the few. And the few who get screwed stick with them in sleepless nights.

Okay.

Now that I have defended … the compensation  is out of whack.

But people can do somthing.

And, no, I don’t mean strikes or picketing.

The Guardian and The Economist have recently written articles on how shrehlders are stepping up and doing something.

In the past the majority of shareholders didn’t even vote. Didn’t need to. Why would they?  They were making money.

Now?  It’s a double whammy. Head and wallet.

Wallet they may not be getting the return they had before.

Head in that they realize the compensation is out of wack. So they are using their votes to reject the CEO/leader salary increase.

This is people stepping up and doing something and course correct.

compensation for executives is under scrutiny from shareholders, and investors, globally.

–          Aviva, a British insurer with a downwardly mobile share price, announced on April 30th that its chief executive would forgo a planned pay rise because of shareholder criticism. The head of the compensation committee for Barclays was heckled at the bank’s annual meeting in London on April 27th. Big American banks cleverly scheduled their meetings away from the clamouring mobs of Wall Street—Citigroup went as far as Dallas and declined to provide a webcast. But its efforts could not muffle the bang made by a non-binding shareholder vote against a ludicrous compensation scheme for Vikram Pandit, its chief executive.

Citi is not alone. FirstMerit of Ohio also lost a shareholder vote in April, having granted its chief executive a steep rise despite single-digit returns on equity and a depressed share price. Three other large American financial firms received less than 65% approval on pay-related votes, a symbolic if not actionable threshold, according to Semler Brossy, a consultancy that began last year to collect data on these votes

Shareholder meetings used to be routine now they are becoming events for people to speak out.

When shareholders (a majority) vote then you know they are actually paying attention … and they actually believe they can do something.

Oh.

Hmmmmmmmmmm … on a separate note …

We have an election coming up. Maybe more than 40percent of all registered voters will actually vote.

Isn’t that why shareholders (citizens) get a vote? To course correct?