Executive Greed

Management failure is associated with a host of factors, some external and others internal to the organization. There are several personal, interpersonal, organizational, and external factors that can affect management performance in different areas.

Basically, a good compensation system is fair and equitable, and it motivates people to perform well to the best of their abilities. Ideally, people should be compensated appropriately in relation to their qualifications (education, training, skills, experience, etc.), authorities, and responsibilities.

The structure of corporate board of directors has evolved over the years to manage the corporation and its business affairs on behalf of its owners indirectly. The primary obligation of the board is to protect the shareholders’ ownership interests by providing adequate oversight over the corporate managers and their business policies and practices. The board directors are nominated and, subsequently, elected by the shareholders in accordance with the corporate charter and its bylaws. Board members may include stockholders, creditors, corporate managers, and other individuals from both inside and outside, who may have some vested interests in the corporate welfare and well-being. Almost all of the elected board directors receive some compensation for their services. Most outside board members usually have major business responsibilities and financial interests elsewhere. The directorship is essentially a part-time position or involvement unless, of course, an individual is on a full-time basis either as paid administrator or as investor. The board may have both voting and nonvoting members.

Over the past few decades we have observed a global trend toward deregulation of business. The marketplace began to experience some major deregulation worldwide starting in the 1980s. In the mid-1990s, deregulation picked up speed at a faster pace to attract foreign capital and gain access to world markets. The pace has somewhat slowed down recently because of some political and economic events. The subprime crisis has crystallized some opposition. The critics are putting pressure on the legislators to reverse the trend and prevent another crisis of wild business management behavior.

Anyone who has talked to a headhunter or recruiter in recent years for an entry level or higher management position knows that most employers look for “team” players. Company representatives make it very clear from the beginning, during the interviewing process, that the firm wants someone who is a willing and cooperating member of the management team—or, the “club,” so to speak. The importance of being a team player is invariably stressed. The organization prefers everyone at all levels of management to follow the “rules,” like a football player, taking orders from the head coach. The coach, directly or indirectly, calls the shots and guides his/her players, along with some serving as assistant coach, team captain, quarterback, and so forth. Each player accordingly plays the tune under the direction of the maestro, in coordination and harmony, like in a musical concert.

Over the past several decades, the global marketplace has become extremely competitive. Worldwide movements toward deregulation and toward political cooperation (in contrast to confrontation) and continuous technological advances have altered the nature of how the business firms compete.

Product and market innovations are inevitable in the global marketplace. To remain competitive and grow, a firm has to innovate or adapt, change, and do what is essential and prudent for business. It does not matter whether the firm is small or large. There are other choices for business too: it can continue to maintain status quo, ignore the market forces, adhere to current or old practices, disregard sound financial principles, and/or follow imprudent and bad business strategies and practices. None of these other choices, ultimately, is without some disastrous consequences in the long run. Recent business crises clearly provide some evidence to this fact.