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Michael Useem
Scholar

Michael Useem

Michael Useem is Professor of Management and Director of the Center for Leadership and Change Management at the Wharton School of the University of Pennsylvania.

The Officer Should Eat Last

As a sign of how much the financial crisis and now economic recession has upended our world, we are now talking about volunteered pay cuts. Just imagine the reaction to a sports coach or company manager demanding less pay, not more, at the height of a winning season or the financial bubble. Ludicrous or worse might have come to mind, perhaps enough to question the leader's fitness for the job.

How much the world has changed. Now, some executives are foregoing pay raises and even bonuses, though shocking executive payouts at Merrill Lynch and AIG remind us that the forgoers are yet the exceptions who have not disproved the first rule of unfettered capitalism: more is better.

At a time when millions of non-executives are facing wage reductions, forced furloughs, and outright dismissals, all amounting to a sharp if not complete loss of income, company executives would be wise to take their pay lumps too, for two reasons.

First, equity is a defining quality of our workplace culture, which translates into the widely shared perception that a person should be fairly paid for the work performed. When corporate performance crashes, as a matter of equity those most responsible for it should give back much of their compensation - and not wait for a claw back.

Second, selfless behavior is a defining quality of effective leadership. The "officer eats last," is the Marine Corps' way of saying so, as was the Civil War adage for cavalry commanders, "feed your horses, feel your men, then feed yourself." Too many executives fed themselves first, questioning their credibility in good times and destroying it now in bad times.

This is a good moment for company executives to take a pay cut for both reasons. When Warren Buffett agreed to take the helm at Salomon Brothers in 1991, after it was rocked by an enormous trading scandal, he insisted on an annual salary of one dollar. He did not personally need the money, of course, but was making a more powerful statement about his leadership than words could ever convey. If his leadership proved successful, he stood to gain, but he would only gain if it proved successful.

By Michael Useem

 |  March 16, 2009; 10:29 AM ET
Category:  Sports Leadership Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
Previous: Pay Cuts: More Than Just a Gesture | Next: Calhoun's Leadership Moment

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Well said. Unfortunately the message falls on deaf ears in some corners.

Posted by: miroslodki | March 17, 2009 2:06 PM
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Well said sir! I hope that you are able to imbue these values in your charges at Wharton.

Posted by: gken69 | March 17, 2009 1:30 PM
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