Your Actions Speak So Loudly

There is a story about Mahatma Gandhi. A mother was concerned about how much sugar her son was eating; and so seeking advice, she took her son to see Gandhi. She asked Gandhi if he would tell her son to stop eating sugar. Gandhi replied come back next week. The following week the mother and son returned and Gandhi told the son to stop eating sugar. The mother asked Gandhi, “This was a very arduous journey for us to come to see you, why couldn’t you have told my son last week to stop eating sugar?” Gandhi replied, “Last week I was eating sugar, this week I gave it up.”

This story illustrates a central tenet of Gandhi’s leadership philosophy: “We must be the change we wish to see in the world.” One of the reasons that Gandhi was a great leader was because he was an authentic leader. An authentic leader inspires others because they are true to their core values and purpose.

How many authentic leaders, whose actions match their stated values, are running for president? Consider the case of Hillary Clinton.

Recently, the New York Times interviewed Hillary Clinton on economic policy. In the interview, Clinton “put her emphasis on issues like inequality and the role of institutions like government, rather than market forces.” Clinton talked of “economic excesses — including executive-pay packages she characterized as often ‘offensive’ and ‘wrong’ and a tax code that had become ‘so far out of whack’ in favoring the wealthy.” Touching a sensitive nerve, Clinton said that these excesses “were holding down middle-class living standards.”

Few could disagree that the middle-class are being squeezed. Salary increases for many Americans are failing to keep up with rising energy and food prices; and in spite of the bursting of the housing bubble, real estate prices remain high. In many organizations, CEO pay has reached troubling levels; and CEO pay doesn’t even seem to be tied to performance.

In the 1950s the average CEO earned 40 times the average pay of his employees; today that number is closer to 400 times. In an expanding economy, such disparities are little noticed; in a troubled economy, this is a recipe for middle-class discontent.

Yet, is Mrs. Clinton suited to address middle-class living standards? This past Friday, during the Nevada primary campaign, the Clinton campaign called the N9NE Steakhouse at the Palms in Las Vegas. According to a Las Vegas source:

The Clintons’ tab came to $1,530 and included entrees of nine steaks, three chicken, three salmon and three Maine scallops, two lobster pappardelle, salads, sashimi, rock shrimp, and various side dishes.

Defender of the middle-class? One cannot help but wonder how many small campaign checks the Clinton campaign had collected from middle class donors—donors who could never dream of such an expensive meal. Is Clinton being the change she says she wants to see in the world?

How can so many be so hoodwinked? Fear, caused by difficult economic times, brings forth polarizing politicians—politicians who stir-up discontent while offering increasingly demagogic solutions to problems. Until the time comes when the public is ready to listen to politicians who address root causes and engage in reasoned dialogue about these causes, we can be sure our economic difficulties are far from over.

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8 Responses to Your Actions Speak So Loudly

  1. Thank you for stirring thoughts!

  2. E says:

    This happens all the time in business. I’m willing to bet money that Hillary did not in fact eat nine steaks, three chicken, three salmon, three Main scallops, two lobster pappardelle, salads, sashimi, rock shrimp, and various side dishes. Usually for teams on business trips, this is regular affair — and may reflect individual choices in accordance to wealth (and not indicative of the named person or corporate entity). For instance, if there were four attorneys on the team who are individually wealthy, they may order $200 dinners, while the mid-managers ordered salads, and so forth. The above sentence construct reveals little about the actual person (Hillary) and the reader may actually formulate an erroneous conclusion based upon it (note the word “campaign”). However, I understand the point you’re trying to make, that she should first focus on the action before making grand statements. However, I think Mrs. Clinton is merely jumping on the bandwagon of rage over matters CEO Pay, the most outrageous of which is that Stanley O’Neal of Merrill Lynch was paid $159 million just to leave his job; especially after his firm suffered a loss of $2.3 billion and had to take a $8.4 billion charge-down ( for failed credit and mortgage-related investments) in the third quarter. (Mr. O’Neal was paid $48 Million Dollars just last year.) For most Americans, this can be seen as sour grapes since it did not occur to them, or specifically to me, but it’s just the same all around — the board of directors are malfeasant. (For the record, I’m not a Hillary fan or a Hillary defender; I just dislike when inconclusive facts are presented as evidence for a summary judgement. The same sort of disinformation could be written about Business School Symposiums and professors who attend them — why shouldn’t b-school professors just not have them because they are spending ‘other people’s money’? I mean, what are they actually achieving?)

  3. Winslie,

    Thank you for the kind words.

    E.

    Thank you for your observations. You are correct in asking about academics. Academics like to travel to warm climates, in the winter, to present papers on other people’s money. As you point out, whether the taxpayer and the student or his/her parents is getting good value is not clear.

  4. Frank v2 says:

    E & Prof. Brownstein,
    I concur with your comments on the pay packages of CEO’s. Most Americans, present company included, look with envy as to how these chosen few are able to negotiate such lucrative deals. But I do have to say “good for these folks!” We live in a free economic society and people are paid what they negotiate and what the market will bear, and as such, the market place determines these rates. Are athletes worth their multimillion dollar salaries? The same type of reasoning holds true in this example. These rates are set based on pure supply and demand economics. However, it is fashionable and easy to get support in attacking big business, but for the most part I believe that the demigod status of most athletes puts them in hands off status.

    So, with that said, it is the board of directors who decide how much to pay an individual (or athlete) in order to secure the best candidate to ensure that the company delivers the expected return on investment that the share holders expect. Shareholders don’t care what business you are in, how many people you employ, etc. They strictly are interested in a return on their investment (or winning the championship) that is significantly better than what they can get putting their money in the bank or some other safe investment. So, I have a hard time when politician lambaste the CEO’s for accepting these kinds of salaries. I suspect most of the politicians would sign up in a New York minute if such a deal was dropped into his or her lap.

    Of course we think that all CEOs (or athletes) are over paid because of the various press coverage that are given to the CEOs of large companies. However, according to a survey done last fall, Pearl Meyer of Steven Hall & Partners says; “The higher the pay, the higher and the risk. As a group, the larger enterprises are somewhat constrained as to salary and cash bonus, while they can use equity and other long-term incentives leveraged on further corporate performance and shareholder value as their principle reward vehicle” (McCord, 2006).

    As a side note my favorite negotiating technique is when a CEO negotiates a firing clause in their contract that allows them to walk away with more money, or just as much money as what they would have made if they had done a good job. Congratulations to the new CEO for being able to work out such a deal: but I think that it is irresponsible for the directors to allow this to happen. I believe E you used the term “malfeasant”. I agree that the new CEO should be rewarded for performance. I just philosophically have a difficult time accepting that an individual who leaves the company in worse shape then when they started and is fired for not performing, should be able to walk away with pockets full of cash. But again, jealousy on my part: I was unable to negotiate such terms in my employment contract.

    So at the end of the day CEOs receive the big packages because they are in demand and the board of directors / shareholders believe that by having a brand name’ CEO at the helm of the company, they have a higher propensity of getting the financial results they are hoping for. In my mind the last thing we need in a free society is to put caps on how much a CEO should make. The market place should be left to decide how much these folks should earn, not the politicians.

    Reference:
    McCord, N. (2006, November). By the Numbers: Dramatic Differences in CEO Pay by company Size, Steven Hall & Partners Survey Shows. Steven Hall & Partners. Retrieved January 27, 2008 using the World Wide Web at: http://www.shallpartners.com/pdfs/CEOpay_PR_110306.pdf

  5. Frank,

    Thank you for your very thoughtful comments. I agree with you that many times free-market forces generate “out-of-line” CEO pay. Confusion over the importance of the CEO vs. the role of thousands of employees generates a belief that the CEO is more important than he/she really is.

    However many times non free-market forces are operating. Many sectors of the economy, such as financials, telecommunications, and energy, operate far from a free-market situation. In such situations “excessive” CEO pay reflects not market forces but the absence of market forces.

  6. E says:

    This is a concur-a-polooza; since I concur with many sentiments on this page. The pertinent additur here is that many sectors of our “free-market” economy are actually not free-markets (energy anybody?), are surprisingly inefficient (in certain instances), and that, if prodded, most learned Americans would not want an entirely “purely capitalistic” market model. Purely capitalistic methods, in history, have resulted at times in various anti-competitive or unfair business practices (Hudson River RR vs Erie RR, Standard Oil, Enron, etc.), and at worst have proven to be inefficient in similar instances (monopolies, oligarchis, collusion, market-panic, inertia, so forth). However, that point is neither relevant nor remotely interesting. The more important query from el Professor’s postulate is… should the government be in the business of repairing and maintaining economic positions, good or bad? Should there be a stimilus/rescue package for what essentially boils down to collective poor judgement by the financial sector, Hillary’s grandoise speech’s/actions notwithstanding? Should everyone’s money, taxed-collected-and-pooled, be the cash basis upon which to restore full faith and credit in the financial market?

  7. zorlu says:

    great post. One book I like and it talks about this issue as well as others is “Leadership, The Challange”. It is a must read. Is there any other leadership books that you can recommend? Let’s share….

    Thanks.

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