<TABLE border=0 cellSpacing=0 cellPadding=0 width="100%"><TBODY><TR class=msghead><TD><TABLE border=0 cellSpacing=0 cellPadding=0><TBODY><TR class=msghead><TD class=msgF width="1%" noWrap align=right>From: </TD><TD class=msgFname width="68%" noWrap>teh_si <NOBR></NOBR></TD><TD class=msgDate width="30%" noWrap align=right>7:48 pm </TD></TR><TR class=msghead><TD class=msgT height=20 width="1%" noWrap align=right>To: </TD><TD class=msgTname width="68%" noWrap>ALL <NOBR></NOBR></TD><TD class=msgNum noWrap align=right></TD></TR></TBODY></TABLE></TD></TR><TR><TD class=msgleft rowSpan=4 width="1%"></TD><TD class=wintiny noWrap align=right>24649.1 </TD></TR><TR><TD height=8></TD></TR><TR><TD class=msgtxt>which is the large public listed company mentioned in the article?
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Nov 18, 2009
THINK-TANK
Curbing the rise of the hero-CEO
<!-- by line -->By Ho Kwon Ping
<!-- end by line --><!--background story, collapse if none-->The danger of the hero-CEO cult is that it corrodes the spirit of collegiality and collaboration that is at the heart of every successful corporate culture and often the source of its competitive advantage.
<!--end background story-->
<!-- end left side bar -->
<!-- story content : start -->
I HAVE argued on various occasions, including in this space, that any reform of the global financial system that is based solely on regulatory changes and unaccompanied by fundamental changes in social values, will be in vain.
So I wasn't surprised to read that while a new American 'pay czar' is trying to impose pay cuts on top investment bankers, the very same bankers have paid themselves this year - with economic recovery still uncertain - the same obscene bonuses as before. It will be a cat-and-mouse game for a while, until politicians have pontificated enough and the public has got its pound of flesh. Then it will be back to normal.
Plus ca change, plus la meme chose - you don't need to be a French philosopher to know that the more things change, the more they remain the same. The glorification of the hero-CEO remains largely unchanged in corporate America. And so, after some short-term stone throwing, social behaviour will revert to the norm. And since norms are shaped by the values of society, we can safely assume that social values will not change.
I have wondered whether I was naive to believe in the importance of values as the determinants of behaviour - public or private. But I'm not alone in believing this, as I found recently. In a speech - entitled whimsically, If I Could Remodel Society (a topic given to, and not chosen by, me) - I had listed several ideas. The one that elicited the most applause was the suggestion that an investment banker's bonus above six months' salary be taxed at 70 per cent and redistributed to primary and secondary school teachers, who are the most important transmitters of values after parents.
This was a suggestion made only half in jest. The part not to be taken seriously was the possibility of its adoption. What was not in jest was the point that it was not enough for us to penalise the avaricious. We must also rebalance values in society by incentivising those whose roles are insufficiently recognised.
In rural Asia, although their salaries are very low, teachers occupy a social position higher than in the West - and higher, unfortunately, than in wealth-conscious Singapore. Until fundamental values - the very values that school teachers used to, and are still supposed to, transmit - are imbibed by future investment bankers who are now still schoolchildren, nothing will change.
Unfortunately, a community of peers does not necessarily ensure the promotion of selfless values. Peer groups can be very self-serving. I am reminded of this truth when I recall my years serving on the remuneration committee of a large public-listed company.
All the independent directors were supposed to reflect the better values of society in general, and to guard against self-serving management. But though the committee consisted of reputable chief executive officers (CEOs) of eminent companies, it became a grouping of back-scratchers. As an outsider, I watched with bemused alarm at how performance targets were lowered or stock options 'reset' - essentially moving the goal posts so that the ball can be said to have scored a goal - so management could receive the same bonuses and stock options as before though the company was not doing well.
Whether it is a jury or a remuneration committee filled with peers, such groups can be expected to reflect 'insider' values that are often self-serving. Only a 'jury' composed of diverse voices from civil society can be truly representative of a society's evolving values. These outside voices can include members of the public. Their commonsensical notions of what is egregious and what is exemplary behaviour can serve as important ballast against corporate greed.
This is not an academic issue, but has direct relevance to the future of business in Singapore. In recent years, Anglo-American capitalism - the Wall Street ethos of the celebrity CEO - has become fashionable in Singapore corporations, including Temasek-linked companies and government-linked companies.
Like a designer brand, the hero-CEO has been coveted as a sign of a company's embrace of aggressive, profit-maximising corporate values. The notion that a single CEO can be so critical to a company's success that he can be awarded bonuses some 20 or more times that of his direct subordinates, became the measure of a company's willingness to embrace American-style, corporate machismo.
Never mind that the facts, even in America, did not bear out this thesis. The Fortune 500 companies whose CEOs received bonuses 20 times more than other members of their team and whose tenure lasted less than five years, did not achieve higher total shareholder returns over the medium to long term than the smaller companies whose CEOs rose from the ranks, served for longer periods, and received bonuses only a few times that of their direct subordinates.
In Singapore, the infatuation with hero-CEOs continued even after the public turned against the ethos. Criticisms in the media by columnists and letter writers of American-style bonuses were met with bland statements that remuneration committees had followed proper governance rules.
Thankfully, the outcry against American-style CEOs in some Singapore boardrooms has tempered the enthusiasm of other boards, and has initiated some public debate about the kind of corporate culture we want to create in Singapore. Business schools, boardrooms, media pundits and certainly the much-maligned 'layman' should all jump into the scrum. The model of the hero-CEO concerns not only remuneration committees; it goes to the heart of the kind of society we want to create.
Hopefully, a thoughtful debate may even lead to some serious consideration as to whether the highly individualistic ethos of Anglo-American capitalism should be replaced by alternatives that reflect the communitarian traditions of Asian cultures. Asia, it is widely accepted, will be the economic leader of this and perhaps even the next century, but its thought leaders have not given enough attention to this subject. The Nordic, Western European and Japanese (to name just a few) modes of capitalism have long coexisted with the dominant Anglo-Saxon variety. Each needs to develop a business ethos and system drawing upon the best traits of its own cultural heritage, rather than simply ape the erstwhile dominant system.
My objection to the disturbing rise of the hero-CEO and his outsized bonuses is not due to some fuzzy sense of egalitarianism; nor am I driven by an emotional objection to elitism. Leadership by its very definition entails a measure of inequality and elitism. The danger of the hero-CEO cult is that it corrodes the spirit of collegiality and collaboration that is at the heart of every successful corporate culture and often the source of its competitive advantage.
<!-- story content : end -->
<HR SIZE=1>Edited 11/18/2009 10:49 pm by teh_si</TD></TR></TBODY></TABLE>
====================
Nov 18, 2009
THINK-TANK
Curbing the rise of the hero-CEO
<!-- by line -->By Ho Kwon Ping
<!-- end by line --><!--background story, collapse if none-->The danger of the hero-CEO cult is that it corrodes the spirit of collegiality and collaboration that is at the heart of every successful corporate culture and often the source of its competitive advantage.
<!--end background story-->
<!-- end left side bar -->
I HAVE argued on various occasions, including in this space, that any reform of the global financial system that is based solely on regulatory changes and unaccompanied by fundamental changes in social values, will be in vain.
So I wasn't surprised to read that while a new American 'pay czar' is trying to impose pay cuts on top investment bankers, the very same bankers have paid themselves this year - with economic recovery still uncertain - the same obscene bonuses as before. It will be a cat-and-mouse game for a while, until politicians have pontificated enough and the public has got its pound of flesh. Then it will be back to normal.
Plus ca change, plus la meme chose - you don't need to be a French philosopher to know that the more things change, the more they remain the same. The glorification of the hero-CEO remains largely unchanged in corporate America. And so, after some short-term stone throwing, social behaviour will revert to the norm. And since norms are shaped by the values of society, we can safely assume that social values will not change.
I have wondered whether I was naive to believe in the importance of values as the determinants of behaviour - public or private. But I'm not alone in believing this, as I found recently. In a speech - entitled whimsically, If I Could Remodel Society (a topic given to, and not chosen by, me) - I had listed several ideas. The one that elicited the most applause was the suggestion that an investment banker's bonus above six months' salary be taxed at 70 per cent and redistributed to primary and secondary school teachers, who are the most important transmitters of values after parents.
This was a suggestion made only half in jest. The part not to be taken seriously was the possibility of its adoption. What was not in jest was the point that it was not enough for us to penalise the avaricious. We must also rebalance values in society by incentivising those whose roles are insufficiently recognised.
In rural Asia, although their salaries are very low, teachers occupy a social position higher than in the West - and higher, unfortunately, than in wealth-conscious Singapore. Until fundamental values - the very values that school teachers used to, and are still supposed to, transmit - are imbibed by future investment bankers who are now still schoolchildren, nothing will change.
Unfortunately, a community of peers does not necessarily ensure the promotion of selfless values. Peer groups can be very self-serving. I am reminded of this truth when I recall my years serving on the remuneration committee of a large public-listed company.
All the independent directors were supposed to reflect the better values of society in general, and to guard against self-serving management. But though the committee consisted of reputable chief executive officers (CEOs) of eminent companies, it became a grouping of back-scratchers. As an outsider, I watched with bemused alarm at how performance targets were lowered or stock options 'reset' - essentially moving the goal posts so that the ball can be said to have scored a goal - so management could receive the same bonuses and stock options as before though the company was not doing well.
Whether it is a jury or a remuneration committee filled with peers, such groups can be expected to reflect 'insider' values that are often self-serving. Only a 'jury' composed of diverse voices from civil society can be truly representative of a society's evolving values. These outside voices can include members of the public. Their commonsensical notions of what is egregious and what is exemplary behaviour can serve as important ballast against corporate greed.
This is not an academic issue, but has direct relevance to the future of business in Singapore. In recent years, Anglo-American capitalism - the Wall Street ethos of the celebrity CEO - has become fashionable in Singapore corporations, including Temasek-linked companies and government-linked companies.
Like a designer brand, the hero-CEO has been coveted as a sign of a company's embrace of aggressive, profit-maximising corporate values. The notion that a single CEO can be so critical to a company's success that he can be awarded bonuses some 20 or more times that of his direct subordinates, became the measure of a company's willingness to embrace American-style, corporate machismo.
Never mind that the facts, even in America, did not bear out this thesis. The Fortune 500 companies whose CEOs received bonuses 20 times more than other members of their team and whose tenure lasted less than five years, did not achieve higher total shareholder returns over the medium to long term than the smaller companies whose CEOs rose from the ranks, served for longer periods, and received bonuses only a few times that of their direct subordinates.
In Singapore, the infatuation with hero-CEOs continued even after the public turned against the ethos. Criticisms in the media by columnists and letter writers of American-style bonuses were met with bland statements that remuneration committees had followed proper governance rules.
Thankfully, the outcry against American-style CEOs in some Singapore boardrooms has tempered the enthusiasm of other boards, and has initiated some public debate about the kind of corporate culture we want to create in Singapore. Business schools, boardrooms, media pundits and certainly the much-maligned 'layman' should all jump into the scrum. The model of the hero-CEO concerns not only remuneration committees; it goes to the heart of the kind of society we want to create.
Hopefully, a thoughtful debate may even lead to some serious consideration as to whether the highly individualistic ethos of Anglo-American capitalism should be replaced by alternatives that reflect the communitarian traditions of Asian cultures. Asia, it is widely accepted, will be the economic leader of this and perhaps even the next century, but its thought leaders have not given enough attention to this subject. The Nordic, Western European and Japanese (to name just a few) modes of capitalism have long coexisted with the dominant Anglo-Saxon variety. Each needs to develop a business ethos and system drawing upon the best traits of its own cultural heritage, rather than simply ape the erstwhile dominant system.
My objection to the disturbing rise of the hero-CEO and his outsized bonuses is not due to some fuzzy sense of egalitarianism; nor am I driven by an emotional objection to elitism. Leadership by its very definition entails a measure of inequality and elitism. The danger of the hero-CEO cult is that it corrodes the spirit of collegiality and collaboration that is at the heart of every successful corporate culture and often the source of its competitive advantage.
<!-- story content : end -->
<HR SIZE=1>Edited 11/18/2009 10:49 pm by teh_si</TD></TR></TBODY></TABLE>
