Wall Street's gibberish no longer tolerated

Wall Street companies who rely on public trust (and money!) better realize their acronyms, fancy words, and gibberish are no longer being tolerated. Their corporate cultures need to change.

The latest evidence that Wall Street corporate cultures are no longer being tolerated is the investigations and lawsuits launched after last week's Facebook IPO fiasco.

The public is interested to learn how Morgan Stanley made money off the deal by "short trades". The public is interested to learn how the banks involved kept lowered growth expectations from some investors, while at the same time promoting the stock to those same people. The public is interested to learn whether legal and ethical lines were crossed.

Facebook and Morgan Stanley are the latest companies facing scrutiny. Others include Goldman Sachs and JPMorgan Chase, which have been in the news for less than stellar reasons this year.

Gone are the days when high-powered men in suits could seemingly pat the public on the head and tell it to run along like a little child. The public wants answers and is not going to tolerate the patronizing arrogance of Wall Street any longer.

With so much money rolling in, why should Wall Street firms care what the public wants?

Because the public includes investors and customers.

The public includes the Baby Boom generation who wants to invest in companies they believe in and Gen Y who wants to work for companies they believe in. Also, the public is slowly starting to recognize the importance of long-term sustainability over a short-term snapshot. We're not impressed with one good quarter now and then. 

Narrowly skipping along the thin line of ethical behavior is not going to cut it for the public any longer.

The firms that align their behavior with all of their stakeholders, not just their stockholders, will not need to worry about the pressures from the public. They will speak in plain terms people understand because they don't need to hide behind gibberish.

Sprint's Hesse makes a rare move

This blog called out Sprint's CEO, Dan Hesse, on March 27, 2012 for being overcompensated. As a former employee, current customer, and current stockholder, I was appalled at exorbitant Hesse's salary increase in light of the company's financial losses. Apparently I was not alone.

Yesterday, Mr. Hesse sent a letter to the company detailing that he will forgo $3.25 million over the next two years. In a startling move that made me gasp for air, he also is going to return nearly $350k received last year. The adjustments are related to the accounting of the iPhone. (For specifics, read the article in today's Kansas City Star.)

Congratulations, Mr. Hesse. I applaud you for listening to your shareholders and for doing the right thing for your employees as it relates to their bonuses. 

How a CEO's padded resume impacts its corporate culture

Late last night, it became public that Yahoo's CEO Scott Thompson padded his resume by claiming to have a Bachelor's degree in accounting and computer science from Stonehill College. Stonehill, a small Roman Catholic college in Massachusetts, also confirmed to CNNMoney that Thompson's only degree is in accounting. (SOURCE: CNNMONEY.COM)

The lie has been on Thompson's bio on Yahoo's site and on past employer's sites including Pay Pal and Ebay. It is a lie Thompson kept up for years, but let's assume none of the employers deliberately perpetuated his lie. 

Now that Yahoo knows about the lie, it's first response was something along the lines of, "Well, he's a great worker, so his degree doesn't matter. If he turns the company around, his degree won't matter."

First of all, it is highly doubtful they would have a similar response when finding out a project manager's resume included a lie of that nature.

Secondly, Yahoo is supposed to be an expert in searches, Considering they missed this big lie on their own CEO's resume, just how good are they at searches anyway? The company's failure to uncover the truth about their own CEO leads to a reasonable assumption that they are not good at what they do. 

Third, Yahoo has had internal issues and performance issues for a long time and this error, along with the response, is no surprise to anyone who follows the company. The company is hanging on by a thread and desperate times call for desperate measures (like not confirming easily whether a new executive is a liar).

Fourth, Yahoo missing the facts about Thompson's degree and the fact that he does not have a Computer Science education are less relevant today than the fact that he lied for years about it. Of course he's learned enough about computer science over the years to make up for the lack of degree in that area. And, perhaps it is reasonable for a major corporation not to verify degrees (although none I know of let that slide these days). What is intolerable is the lie and the perpetuation of the lie. If Yahoo overlooks the long-term lie, it sends the message that it's a company not to trust.

When a company makes an error like this and responds so cavalierly, its customers, investors, and employees notice. So far, the leaders are saying the lie is okay, and the message is being heard loud and clear by all of its stakeholders. The culture of distrust will make it even harder for Thompson to turn Yahoo around now.

(Article source:  Yahoo CEO Scott Thompson caught padding his resume)


What do you think? Does the lie matter?

CEO salaries should be related to performance, not Wall Street

It makes sense that the biggest paychecks would go to those who make the biggest decisions which impact the most people, especially when the decisions impact the long-term competitive position and viability of the company.

It does not make sense that those same decision-makers are rewarded gigantic raises ten times the regular employees' raises when the decisions result in 25% greater loss from one year to the next.

If an employee's performance yielded similar results, she would be fired. It does not make sense that CEOs with poor results get rewarded outlandish pay increases instead.

The latest was published in the Kansas City Star today with this headline: Sprint’s Hesse gets 31 percent pay boost as Overland Park carrier’s losses continue (article)

The article says Hesse's decisions led to a 25% bigger loss this year than last, and his decisions are not helping turn the company around. However, the stock price has gained 22% this year. It trades below $3. It shouldn't take much for it to get a 22% increase.

Is Hesse's raise tied to the stock price or to the company's overall performance?

It appears this is another example in which the CEO's performance is not measured or rewarded in the same manner as others'.

Why not? Furthermore, why would CEOs whose performance at one company fails be highly sought after at other companies? That makes no sense but it a topic for a different day.

Sprint is the largest private employer in Kansas City, so its CEO getting a significant raise makes news around town. So many people in the area have worked for Sprint, it almost always comes up in conversation. Sprint has laid off so many people over the years, they're one of the biggest causes of the regions growing entrepreneurs. They also are well known for their culture of mediocrity. In fact, the culture of mediocrity is so commonly known, some employers will not hire former Sprint employees because of it.

When the CEO's decisions have led to greater losses year after year, and no end is in sight, it is unreasonable to reward him. It is certainly unreasonable to reward him with millions of dollars while his fellow employees get no raises, layoffs, and bad reputations. Sure, Hesse won't have to work again, but if he wants to, he will land another highly lucrative gig. His Sprint coworkers, however, have difficulty landing great jobs in Kansas City because of the culture he fosters.

That is wrong and Hesse and his peers should have the integrity to hold themselves accountable for it.

Apparently, the only people who will hire employees with reputations of mediocrity and poor performance are Boards of Directors. If the CEOs and Boards won't hold themselves to a high standard of excellent performance, the employees and customers need to.

If Sprint were to cultivate a culture of integrity and excellence, Hesse could actually earn the salary and bonuses with integrity.

It is time for CEO pay to be aligned with company performance as it relates to all of its stakeholders, not just its stockholders. It is time for CEO pay to be based on results instead of short-term stock price fluctuations. It is time for CEO pay to be earned with integrity.

On a personal note...
I began my career with a division of Sprint, the publishing division. We published the phone directories, and, we loved it! The company made money, hired great people, grew at a reasonable pace, and fostered a culture of excellence. Many of us remain connected today, with annual reunions in the summer and around the holidays. I share that in the interest of full disclosure and also to show that not all Sprint is bad. Well, Sprint sold that division a while ago when it needed cash. But, it was great until then. I am a former employee who loved working for the division I was with, current customer who has had superb service, and stockholder who is unimpressed with a 22% increase.

_______________________
What do you think?
Are you ready for CEOs' pay to be tied to performance?