There are times in business when great leaders face economic hard times within their companies. I could make the case that if you haven’t experienced hard times, perhaps you’ve been playing it a little too safe.
During really hard times it is sometimes customary for the leader to take a cut in pay. In today’s economic hard times it is almost common. Lee Iacocca set the standard back in the '70s with Chrysler when he reduced his salary to the now infamous $1.00 a year.
Several times in my career as the leader I have reduced my salary to $1.00 a year. It is what leaders do when profits are non-existent. The moral compass inside switches on and says, “Hey, you’ve had to make personnel cuts. At some point in time you most likely will ask people, who are accustomed to receiving robust profit sharing and performance bonuses, to accept less than they are accustomed to receiving. Therefore, until things return to profitability, your salary is zero or the infamous $1.00 a year.” It just felt like the right thing to do as the leader.
So how does John A. Thain, former president of Merrill Lynch, pay out $3.6 billion in bonuses weeks before they posted a staggering fourth-quarter loss of $13.8 billion in 2008? Where is Thain's moral compass? I would maintain that the moral compass was turned off when John Thain, and others like him, stepped up as leaders and made that decision.
Read Part II tomorrow: “Who sets the moral tone in our organizations?”
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