Category: General

“… Morgan, it is said, would never lend money to a business where the boss was paid more than 20 times the wages of the lowliest employee. Anything more, Morgan thought, showed that the boss was only in it for himself and the business was therefore a credit risk.”

By this measure, J.P. Morgan would likely withhold loans from many 21st century U.S. companies. And, within the next several months, we will know with certainty as more U.S.-based public companies disclose, for the first time, the ratio of chief executive officer (CEO) compensation to the median compensation of all other employees (in keeping with the adoption of a final rule by the Securities and Exchange Commission (SEC) as mandated by the Dodd-Frank Wall Street Reform and Consumer Protection Act).

Because the SEC rule provides companies with considerable calculation flexibility, the reported ratios are expected to span a wide margin. According to the AFL-CIO Executive Pay Watch, the 2015 average total compensation for S&P 500 CEOs compared to the 2015 average compensation for nonsupervisory employees working in the U.S. was 335:1, while, according to PayScale, the median 2015 cash compensation for 168 of the highest-paid CEOs in the annual Equilar 200 study compared to the compensation of the median employee in those same 168 companies was 71:1.

Beginning in 2017, this pay ratio disclosure will present significant strategic and communication challenges for public companies, as key stakeholders, particularly employees and investors, seek to understand their corporation’s calculation, compensation positioning relative to the market, and current and future reputation implications.

Communications, Investor Relations and Human Resources teams will be expected to address questions, such as:

• How was the compensation of the median employee determined?
• Is compensation for seasonal employees, or contractors, included in the calculation or are only full-time employees included? What about non-U.S. employees in a multinational company headquartered in the U.S.?
• What compensation elements (equity, cash bonuses, overtime pay, etc.) are included in the calculation?
• Why was our company’s ratio significantly higher or lower than other companies of similar size, or other companies in our industry or geography?
• Why is “my” compensation so far below our company’s median employee compensation level?

And, corporate boards and financial community members may consider issues like these:

• Are our compensation practices rewarding desired behaviors and outcomes at our company, including strategic clarity, innovation, thoughtful risk-taking, financial stewardship and long-term performance?
• Are our compensation practices attracting and motivating talent at every level of the organization?
• Is there an “optimal” pay ratio within our industry … or for companies of our size and growth trajectory?
• What changes in compensation policies and practices should the company consider in light of pay ratio disclosure implications?

While much has been previously written about the operational burden and financial costs inherent in implementing this SEC rule as well as the challenges of clearly communicating the disclosure to key stakeholders, in our view, it also offers an excellent opportunity for companies to demonstrate genuine leadership.

In the coming months, corporate leaders who understand the importance of enhancing their brand and reputation will:

• Patiently and transparently communicate information and relevant context about their pay ratio to key stakeholders,
• Take actions that address significant compensation inequities, and
• Leverage their employees’ power and passion in pursuing a greater business purpose.

Through strategic communication and a respectful, rewarding corporate culture, organizations can inspire the commitment and alignment that is essential to elevating long-term performance and reputation.

 

By highlighting this painful, growing chasm, this election has perhaps provided the medicine we need to begin to cure our nation’s sharp divide. Many, on both sides of the political aisle, have been shaken out of their complacency to a place of action, and that involvement just may be the start of a new dawning of civility, equality and tolerance within our democracy. Or at least that’s what we have to hope, believe and act on in such a trying time.

Last month, First Lady Michelle Obama reminded us that the measure of any society is how it treats its women and girls, saying “People who are truly strong lift others up. People who are truly powerful bring others together.”

The best leaders do exactly that. They lift people up and bring people together. And if our president-elect is indeed the great leader he claims to be, he will show us that he can change the tone of our national discourse, bring civility and respect to the forefront, and foster trust in each other and the institutions that underpin our democracy.

And the rest of us must give him “an open mind and a chance to lead,” as Hillary Clinton urged us this week. It’s time for all of us to take the high road.

Taking the high road is what it means to live and lead with integrity. To put what’s best for the country, organization or team ahead of our own self-interests. To be assertive and make sure our voices are heard, but never use the pulpit of leadership to behave like a bully.

We must be strong without being obnoxious … direct without being offensive. We must demonstrate that we can have discussion and debate – and even get angry – without name-calling or shaming. And we must unequivocally reject all acts of discrimination and hate. When we stand strong in the shared belief that civility, equality and respect are principal American values, we will re-shape our nation’s narrative and its future.

The complex challenges of the Fourth Industrial Revolution demand this from us. No single leader, party or entity can move us through this new terrain alone. We all need to truly listen to people with views different from our own, even when we can’t fully relate to their ideas and opinions. And we must collectively hold our country’s leaders accountable for putting America’s progress before partisan politics. If we want government of the people, by the people, for the people, then we have to stop accepting partisan antics from either party.

Even in our earliest days and decades as a country, there were stark disagreements among our leaders about the best policies, direction and actions to achieve a successful future. Disagreement and debate are foundational to our democracy. But, to continue to achieve our collective promise and potential, we must stop being so mean, hateful and rude. No more pointing fingers or denigrating and blaming others. Now’s the time to look in the mirror and take responsibility for our own actions and words.

Indeed, now is the ideal time to become a tireless advocate and role model for the civility, equal opportunity and respect we want America to be known for. Given the state of the electorate – and the nature of our now well-developed social media habits – this won’t be easy.

So in the spirit of unity, here are five small steps we can all take now to be the role models we want to see:

1. Be curious about what others think. Expand your circle. Talk to people with views different from your own.
2. Acknowledge others’ points of view and pain. Look for the humanity in everyone. Remember, acknowledgement is not agreement.
3. Challenge your own prejudices, labels and entrenched views. This is the hardest part – but perhaps the most crucial. We all have built-in biases. Step away periodically to welcome fresh air.
4. Slow down. Pause before responding – in real and virtual conversation. Give your head a moment to catch up with your heart.
5. Go high when others go low. As Maya Angelou said, “Be somebody’s rainbow.” Our world has enough clouds.

 After the final wording was approved on July 4, a handwritten copy was sent to the printing shop of John Dunlap, which overnight printed about 200 broadsides for distribution. In the days and weeks that followed, the Declaration was read to audiences and reprinted in newspapers across the 13 states.

Fast forward to the business climate of 2016: Like the delegates in 1775, today’s C-level executives are expected to be enlightened and courageous leaders who, despite a turbulent world, create a sustainable vision of their organization’s future. However, as they navigate unprecedented challenges and juggle expanding roles and responsibilities, the demands on the C-suite have never been greater.

In KPMG’s 2016 U.S. CEO Outlook Report, 69% of the CEOs surveyed said they are “concerned by the number of mission-critical issues that they have not grown up with or experienced previously in their careers that now require their leadership.” In addition, today’s CEO is expected to be change agent, coach, customer champion, company storyteller and more, all rolled into one.

And it’s not just the CEO role that’s transforming. More is expected of every C-level leader. No longer just functional heads, these executives are critical partners in guiding enterprise strategy and anticipating future talent needs. In fact, Fast Company predicts the advent of new C-level roles, including Chief Officers focused on Ecosystem, User Experience, Data, Privacy and Freelance Relationships, to name a few.

With technology, social activism, economic disparity and globalization disrupting business models and testing the capabilities, confidence and composition of the 21st century C-suite, strategic communication is essential to driving positive business results. It provides clarity, ensures alignment of decisions and actions, fosters trust and protects and preserves organizational culture. And, just as America witnessed with the broad dissemination of the Declaration in its earliest days, effective communication unifies and integrates people and processes in support of a clear purpose and direction. Making communication a strategic priority is, and always has been, an undeniable truth of great leadership.