Top Job No Longer So Safe
CEOs Coming Under Much Closer Scrutiny
By Kevin Smith© Pasadena Star-News, March 07, 2005
Being at the top isn't what it used to be - particularly if you're a CEO. In recent years, chief executive officers of several major companies have come under fire for corporate wrongdoing. As a result, CEOs now operate under increased scrutiny - scrutiny from their corporate boards and from shareholders.
The trend was brought home yet again Monday when Boeing Co. announced CEO Harry Stonecipher been forced out because of an ethics scandal involving an affair he had with a female company executive.
Boeing Chairman Lew Platt said the affair by itself did not violate the code of business conduct at the company, but he also alluded to "some issues of poor judgment' involving Stonecipher.
Is the position of company CEO being turned into a corporate ejection seat?
Gary Kaplan, president of Gary Kaplan & Associates, an executive search firm based in Pasadena, doesn't necessarily think so. But he does acknowledge that expectations regarding a CEO's performance are probably higher than ever.
"CEOs are being held more accountable than in the past,' said Kaplan. "There's been a lot of pressure put on public corporations in this regard and that's led to modifications in terms of board governance.'
Many companies are moving away from the "crony-style' board of directors where a CEO gets to place all of his or her friends on the board - an arrangement that virtually guarantees the CEO's views and philosophies will be supported, Kaplan said.
"There's been a lot of pressure from a governance standpoint to alter the boards and have more independent members,' he said. "There's a concern about pleasing not only the regulatory agencies, but also the shareholders.'
Diana Peterson-More, president of the Organizational Effectiveness Group, a Pasadena company that offers organizational consulting to corporations and nonprofits, said the ever-increasing salaries and other compensations for CEOs have given critics more ammunition to scrutinize a company leader's performance.
"The compensations are so large in relation to the average worker,' she said. "Expectation levels have risen exponentially.' A new survey by Mercer Human Resource Consulting found that bonuses paid to CEOs surged 46.4 percent last year. In fact, the median total direct compensation of $4,419,300 was about 160 times that made by the average U.S. production worker last year.
"I think there are several elements in operation,' Peterson- More continued. "It seem as though (a CEO's) life becomes an open book. A lot of personal transgressions that in the early days weren't well known certainly are now. And there are quality-of-life issues ... it can take a toll on a person's health.' Kevin Smith can be reached at (626) 962-8811, Ext. 2701, or by e-mail at kevin.smith@sgvn.com .
