CEO's

In the 50’s the CEO had a 10 or 20 year plan. The long term growth of the company was important to him as sort of a legacy. As time passed the vision shortened until the 90’s when it was the next quarterly dividend that mattered. There were a number of reasons for this including rapid communications concerning corporate performance. Information spread quickly from analyst to investor and news of comparable investment opportunities abounded. The major problem began in the 1970’s and 80’s when something called shareholder value maximization took place. Instead of being concerned about R&D and satisfied customers the CEO’s spent their time figuring out how to satisfy the capital markets, that is, stockholders. The CEO became a bean counter and was a slave to the stock price. During this same time period the way in which CEO’s were compensated also changed. Instead of growing the company to increase market share and profit the CEO concentrated more on networking. Who you know became more important than what you do. CEO’s got positions on company boards and were instrumental in determining compensation packages for other CEO’s. It became one giant club where the old adage of back scratching became a common theme. Salaries increased from 30 times the rate of the average employee to 300 times. It was an incestuous relationship that made a mockery of the free market system. Taking into account these two factors the role of the corporation has to get away from the corruption of things like the swinging door into Washington, the good ole boy system of compensation and back to free market capitalism. The must increase investment in R&D which requires a long term outlook as innovation is the only way the US can offset the disadvantage of wages and compete on the world market. CEO’s have to be the kind of people who are motivated by something more than money. They have to be willing to make a long term commitment to building a solid company that includes motivating employees to once again be concerned about the customer.