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How Much is Too Much for CEO Pay

drucker retail firm Is Your Future Leader Working In Your Company Now? How To Grow A CEO

How Much is Too Much for CEO Pay

How much is too much? If you applied this to soft drinks, perhaps 5 cans of soda a day is too much. But what about 3? There are things we can agree on as a society that crosses the threshold of being “too much.” Yet, it’s a relative question and broad-based agreement is tricky.

When we talk about money, the same applies. Some folks might say so and so makes too much money. Perhaps, but where (and who) draws the line? CEOs are often targeted when it comes to folks making too much money. It’s natural to place the guy or gal at the top in the crosshairs. After all, if you work for a company, odds are the person making the most is the CEO. But how does CEO compensation affect other areas of the business? Moreover, is there an ideal ratio of the compensation of a CEO to the median compensation of a company’s employees?

These two questions have been batted around for decades. The prominent management scholar, Peter Drucker, was outspoken on the issue, warning that an ever-widening ratio would prove problematic for the health of the business and society as a whole. Intuitively this is rational. Rising inequality can result in more discontent. So it is only natural that the Drucker Institute, founded by the late Mr. Drucker, is the latest to return to these pending questions. 

Drucker Institute researchers examined 482 public companies with disclosed pay ratios. They then applied 34 different indicators to rank them over five areas: financial strength, innovation, customer satisfaction, social responsibility, and employee engagement. Drucker stated back in 1998 that he’d advise managers to try and maintain a 20-to-1 salary ratio at their companies. Anything beyond, reasoned Drucker, would create resentments and negatively affect morale. 

The Drucker Institute, not surprisingly, are fans of the late Drucker. So when their researchers ran the numbers they were shocked at the outcome. In short, companies with the highest pay ratios faired the best in all five areas. Those companies with the highest pay ratios (upwards of 481:1) measured overall effectiveness scores of 57 on a 0-100 scale. Meanwhile, those in the lowest quartile were 50. The customer satisfaction spread was similarly substantial as was innovation and the others. So what does this mean?

One explanation the Institute provided was most of CEO pay is in stock and stock options. At the time the data was pulled share prices for many of these firms were robust, hence increased compensation. Another explanation came in the form of numerous studies that refute these findings – pay disparity essentially mattering to employee satisfaction and similar areas.

One could take the Institute’s results and argue the sky is the limit in terms of paying CEOs. Or conversely, in keeping a firm’s median wages stagnant. Both sound untenable and bad for business. Yet, perhaps what these findings point to is the difference in pay is not as “political” as it was when Drucker was alive. We could point to many publications that would say otherwise, however, which is why this issue will continue to be studied for the conceivable future.      


drucker retail firm Is Your Future Leader Working In Your Company Now? How To Grow A CEO

Is Your Future Leader Working In Your Company Now? How To Grow A CEO

As companies face new challenges in a rapidly changing world, leadership has never been more important. Business owners and boards are looking for strong CEOs, but what’s the best way to find them?

One study shows that CEOs hired from outside a company don’t perform as well, on average, as those who are internally promoted to the top spot. A benefit of grooming a CEO in-house are that person’s familiarity and alignment with the company’s culture and growth processes, but today’s demands and disruptions require special leadership qualities that need to be honed and observed at every step up the corporate ladder, says Benjamin Breier (, ForbesBooks author of Intentional Disruption: Leadership lessons in Healthcare, Business, and Beyond.

 Company owners and boards of directors can be ahead of the game if they grow and produce C-suite leaders, especially CEOs, from within,” says Breier, formerly CEO of Kindred Healthcare LLC. “Targeting that potential early on, providing the necessary experiences and promoting professional development leads to a CEO who can transition smoothly to what will be the company’s most challenging role.

“Soft skills such as emotional intelligence, authenticity, communication, and empathy are paramount in today’s CEO. They have to figure out how to grow the business, how to be strategic, and how to mix the business with the mission.”

Breier offers the following tips to business owners about grooming a CEO from within the company:

  • Challenge them in different roles. Breier says one way to identify and build high-potential leaders who can become CEOs is to challenge them with tough assignments in different jobs and give them minimal support. Those who produce consistent results will gain confidence and valuable experience.

“Any young person with leadership aspirations has to be willing to perform any job that they as a leader might ask somebody to do,” Breier says. “No job should be beneath you. See what you can learn, how different jobs work, how to problem-solve, and what people in that space are going through.” The result, Breier says, is that when one who has traveled that path becomes CEO, “they can talk to anyone at any level and have credibility as a leader. They can relate to all employees and make a connection.”


  • Give rising leaders broad authority. “The buck stops with the CEO, so on the way up to that role, it’s important for the company to provide top managers who are CEO candidates with wide decision-making authority,” Breier says. “Create opportunities where your leaders oversee budgets, strategy and people. You want to breed leaders who are decisive. Encourage them to think like CEOs, with a strong focus on metrics and value creation.”
  • Look for resilience. Climbing the corporate ladder virtually guarantees some falls along the way, Breier says, and owners or board members looking for strong leadership need to find people with resilience – a proven ability to bounce back quickly from setbacks. “When you’re the CEO and times are tough, everybody in the company is looking to see what your body language is going to be, and what your attitude is,” Breier says. “Part of your job as CEO is to be optimistic, courageous, and forward-looking when the big rock needs to be pushed up a high hill.”
  • See if they can disrupt in a direction-changing way. Breier says today’s ever-changing world demands CEOs who cannot only handle disruption but prompt it in a way to move their company forward. He calls this intentional disruption, which he defines as “a bold, purposeful, personal and business strategy to create opportunities and kindle successes while counteracting the inevitable disruptions wrought by external forces in volatile times.”

The most successful leaders, Breier says, are proactive rather than reactive and make the best positive disruptors. “Intentional disruption means going on offense and letting the problem weigh your company down. Top leaders must develop skills and tools to counteract forces that are capable of destroying their companies and their future leadership opportunities.”

“The long journey to becoming a CEO does not come from a straight line of victories,” Breier says. “It comes from an accumulation of experiences, good and bad, that expand the knowledge, sharpen the focus and strengthen the conviction of a well-developed leader who’s earned everyone’s trust.”




2 Phrases Business Leaders Use To Build Effective Knowledge-Based Companies

Executives are faced with challenging economic conditions today. Leadership is the new competitive advantage and the organizations that embrace it will survive, while those that do not will find their organizations facing possible acquisition. Additionally, knowledge management has been a focal point of the executive span of control but has not been associated with leadership enough to make it an integral part of business success. One tool for executives to use when considering lessening the gaps between success and possible failure is to adopt leadership and become a leader. Thus, executives must understand that leadership can effectively lead organizational change to successfully implement the projects of knowledge management and, therefore, remain competitive.

I indicate that to improve knowledge management effectiveness, leaders, and for the sake of this study Leaders, act as change agents who have developed competencies to better deploy corporate strategy. Better use of this organizational factor mediates the relationship between leadership and knowledge management to include aspects that have not been considered by previous studies. I offer a new and unique approach that can be easily adopted in the workplace. I do this by thoroughly looking at the aspects of executive leadership explained in the article: leadership, corporate strategy, and knowledge management.

Corporate strategy includes four dimensions: analysis, pro-activeness, defensiveness, and futurity. Analysis strategy focuses on identifying the best solutions for the organizational problem. Leaders apply this strategy to create more innovative solutions for organizational problems. The pro-activeness strategy emphasizes the effectiveness of long-term decisions. Leaders employ this kind of strategy to develop a vision of adopting more comprehensive information about the future. Defensiveness strategy can also be applied by leaders by taking into account the objectives of the strategic implication that seeks to decrease organizational costs and redundancies. While leaders focus on implementing changes, a defensive strategy can be used to modify the current processes to enhance organizational efficiencies.

The fourth strategy, futurity, incorporates a proactive strategy that identifies the opportunities that are available, but not always addressed in the business, the global environment, and the political regulation changes. This strategy can be also enhanced by leaders as they adopt a strategic posture that inspires employees to identify better opportunities in both the internal and external environments.

Corporate strategy can be employed by leaders to effectively manage organizational knowledge. For example, an analysis strategy could enhance the knowledge creation process by identifying new opportunities in order to provide better alternatives for managers to make a more effective decision. Michael Cohen and Lee Sproull have indicated that the analysis strategy is highly associated with a company’s capacity to create new knowledge. In many ways, a proactive strategy could enhance knowledge transfer by developing interactions with both departmental units and the business environment.

When adopting a more futurity type strategy, leaders can enhance the knowledge utilization process, thereby developing guidelines for future pathways and determine future trends in the external environment and allocate their resources accordingly. Leaders can, therefore, exploit organizational knowledge through embracing the four strategic aspects of analysis, pro-activeness, defensiveness, and futurity.

How Executives Can Use These Findings?  

Executives can now see how leadership can cultivate a strong strategy, which will enable knowledge management processes within organizations. This is my experience of working with a team of top-level management consultants in the consulting industry. My experience says that a firm’s ability to enhance knowledge management can be highly affected when executives adopt leadership as the primary form of managing people, resources, and profitability. This article also adds to a relatively small body of literature and develops our understanding of the indirect contribution of leadership in improving knowledge management through better use of corporate strategy.

This study was designed to find if leaders indirectly influence knowledge management by affecting corporate strategy. Previous researchers repeatedly uncovered leadership’s direct impacts on knowledge management. This article articulates a different approach. I simply extended the literature by showing how leaders can also contribute to knowledge management by fostering an effective corporate strategy. This organizational factor coupled with leadership and knowledge management is presented as a new approach for executive implementation.


Mostafa Sayyadi works with senior business leaders to effectively develop innovation in companies and helps companies—from start-ups to the Fortune 100—succeed by improving the effectiveness of their leaders. He is a business book author and a long-time contributor to business publications and his work has been featured in top-flight business publications.