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Andy Stern
Labor leader

Andy Stern

Andy Stern is president of the two-million member Service Employees International Union (SEIU), the fastest-growing union in North America.

Incentivize the Long Term

Creating an organizational culture focused on the right goals and outcomes requires a combination of information and regulation, as well as leadership. In a competitive world, the rules must reinforce solid long-term thinking so that balancing risk and reward is not seen as merely a test of the "great leader," but is expected behavior for all employees.

Of course, a wayward leader like Bernie Madoff can always derail the best structures and oversight, but a whole culture, led by Wall Street, demanding that, for example, AT&T keep pace with a ponzi-risky-WorldCom/Enron business model regardless of the long-term risks is lethal.

I just returned from China where a major entrepreneur talked of his company's success as a result of how it had ordered its priorities:

1. Customers

2. Employees

3. Shareholders

So let us create a greater financial and regulatory framework that reduces risk, values assets realistically, and incentivizes long-term over short-term profits. Let's have a compensation system that rewards long-term success. Let's have institutional investors take a more active role in setting the long-term framework and allow for the democratic nomination and election of the boards of directors.

Let's end the shareholder/share-price-only mentality and have it be more balanced with rewards to customers and employees. And let's have leaders and boards of directors who are more diverse in their interests and background and who understand that leadership involves far more than picking the right CEOs and gloriously compensating them.

By Andy Stern

 |  September 14, 2009; 12:18 PM ET
Category:  Economic crisis Save & Share:  Send E-mail   Facebook   Twitter   Digg   Yahoo Buzz   Del.icio.us   StumbleUpon   Technorati  
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Surprise!

A ubion leader thinks a company should put their employees ahead of the shareholders who own the company.

If Mr. Stern owns 100% of a company, he should be free to put his employees ahead of himself. That's a right inherent in ownership. I know many owners of small businesses who often do that.

You lose that right when you sell shares to others.

Then you must treat your employees in a way that benefits the shareholders. That usually involves a mix of positive and negative incentives for employees. Reasonable people can differ about what mix of positive and negatives produces the best results for shareholders, but we shouldn't lose sight of the real goal.

Posted by: jfv123 | September 15, 2009 11:48 AM
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