[FOUNTAIN]Managers must stay alertAlthough Anthony “Lee” Iacocca, who had saved Chrysler from the verge of bankruptcy, comes to mind when thinking of the “one-dollar salary,” many similar CEOs exist in the United States. The Co-founder of Apple Computer, Steve Jobs, and John Chambers of Cisco Systems Inc., among others, survived on a one-dollar salary during the late 1990s and put their companies on the map. The gesture of receiving a one-dollar salary was a show of self-sacrifice and a prelude to a bitter lay-off.
However, American CEOs, who are used to receiving astronomical salaries, are very calculating when utilizing this kind of “free service.” They know they can make money off incentives. If the spirit of reform diffuses into the company and the company improves drastically, the CEO will be compensated copiously. When looking at U.S. Hewitt’s Executive Compensation Index for 2006, the base salary of large company CEOs made up only 11 percent of their total salaries. The majority of their salaries were based on long- and short-term incentives, including stock options. In particular, companies need to hire expert executives that can deliver visible results to powerful stockholders with large funds and pension funds that tirelessly push for stock price increases. This system skyrockets the value of star CEOs. Enormous incentives enjoyed by CEOs have been a powerful inducement for American CEOs and the source of great debate regarding inflated salaries. Despite the explanation by CEO Kris Park of Hewitt Associates, who said, “American CEOs are worth what they are paid because they are entrusted with important power and responsibility,” many criticize it saying, “It is difficult to fathom why their salaries are a hundred times higher than the average employee.”
Earlier this year in the United States, the question of large severance packages sparked a lively debate across the country. Home Depot CEO Bob Nardelli took responsibility for the company’s poor economic performance and resigned, pocketing $210 million on his way out. He was paid that amount because it was a part of his contract. Citing the example of Pfizer Inc. giving Hank McKinnell a $213 million severance package, the IHT criticized it, calling it the “golden goodbye” and “a ridiculous allowance for failing.”
The “CEO market” in our country is starting to gain life. People with large salaries reaching to the millions of dollars have started to work in large corporations.
If they want to avoid the criticism leveled at their U.S. counterparts for being overpaid, they will have to stay alert and manage their companies well.
*The writer is a deputy business editor of the JoongAng Ilbo.
by Hong Seung-il