When Steve Jobs resigned as CEO of Apple in 2011, Apple shares immediately dropped 5 percent. The reaction was so strong because Jobs had embodied Apple's ethos. His creative, controlled persona had begotten the cultural DNA of his organization. That doesn't mean he was an ideal leader or someone we should model our lives after. Leading with your life is not a normative platitude. It is a descriptive reality. Leaders like Jobs don't just tell their organization's story; they live it. And in this way, they communicate a narrative to their employees, consumers, and the public—whether it be the plight of the underdog, a history of innovation, a period of frugality before a return to full strength, or a dedication to employee care. Extraordinary leaders do more than verbalize; they personify.
While the majority of leaders today are not as closely identified with their organizations as Jobs was, every leader who aspires to make a significant difference in her firm, industry, or society must inspire her constituents not only with her words but her actions, habits, and traits. The quickest way to bring down a political opponent is to uncover marital infidelity; voters surmise that a politician unfaithful to his wife will be unfaithful to his political promises. Similarly, when CEOs institute layoffs and pay cuts while simultaneously raking in millions, employees, shareholders, and the general public resent the hypocrisy.
Glenn Tilton is a case in point. After graduating from the University of South Carolina and rising through the ranks at Texaco, Tilton was named the CEO of United Airlines in 2002—the airline's third chief executive in one year. The entire airline industry was struggling in the wake of September 11, but United's case was especially dire. To complicate matters, the employee stock-ownership plan enabled the two major labor unions at the airline to fire a CEO. This arrangement produced, in Tilton's words, “a ridiculous situation.” His assessment—one shared by many outside investors—was that the actions required by the CEO to turn United around were the very ones that would trigger his dismissal.
Tilton, however, succeeded in leading United through the industry's largest-ever bankruptcy. To get the company back on its feet, he exacted deep cuts in employees' wages and canceled the airline's pension plan through the bankruptcy proceedings. Yet Tilton underestimated the importance of symbolic issues such as executive compensation and pay packages for top employees. Indeed, he was the highest-paid airline executive in the industry the very year that United's employee pensions were canceled.
He saw nothing wrong with that scenario: “My view of attracting the right people to a bankrupt company was they should be paid a virtual premium. People—including myself—who weren't a part of decisions that put this company into bankruptcy should be well paid to come sacrifice the possibility of advancement in another company.” During tense negotiations with aviation workers in New York, Tilton and the United board stayed at a Ritz-Carlton hotel, and when United finally emerged from bankruptcy, Tilton and senior management were awarded large pay packages. In 2008, company pilots called for Tilton's resignation, citing improper management. They created a website for their cause, and flight attendants wore orange bracelets that said, “Glenn must go.”
Their efforts were to no avail. Tilton remained at the helm, all the while raking in significant paychecks—he landed on the Forbes list of top-paid executives in 2009 and 2010. Through his comments, Tilton communicated United's dire financial straits. Yet he did not see how his rising pay contradicted this overall narrative. No doubt, his individual pay package was insignificant in the grand scheme of United's finances, but it was highly significant in the eyes of United employees. Tilton may have saved United from financial collapse, but he eroded any goodwill that existed between the employees and upper management.
While many leaders make similarly alienating choices, the best leaders recognize the power of their actions—even if they are symbolic—and they use this knowledge to get more things done in and through their organizations. Mike Birck, the former chairman of the telecommunications giant Tellabs, could not be more different from Tilton. Birck founded Tellabs in 1975 and led the company to its height in 2001, when it had nearly 9,000 employees and record sales of $3.4 billion and earnings of $730 million. After the telecom industry bust in the early 2000s, the road was not easy, but Birck was committed to doing right by the firm's workers. Rather than instituting layoffs right away, Birck asked workers to report to work only four days a week and cut the pay of senior management by 20 percent. But there was only so much that could be done. In the end, he had to downsize and contract out Tellabs' manufacturing, shrinking the company to one-third its original size.
Much like Tilton, Birck made major changes to his organization that resulted in layoffs. And like Tilton, Birck made a lot of money. But Birck was honored rather than castigated by his employees. He retained enormous moral authority, because he understood the symbolic nature of leading—that we lead as much with our lives as with our actions.
Many leaders I encountered made token gestures such as refusing bonuses or traveling by the subway instead of by limousine in order to communicate economy to their constituents. Depending on the individual leader, these self-denials may come out of a genuine respect for their employees, or they may simply be a manipulation of public perception. Especially in a climate of recession and layoffs, leaders recognize that conspicuous modesty reflects well in the eyes of the public.1 Whether under scrutiny from their employees or the larger populace, leaders like Birck are aware of social attentiveness to their actions, and this attention constrains them. Platinum leaders attend to dynamics such as these.
As the first woman to lead her institution, one nonprofit executive certainly feels the scrutiny. She recognizes that there are benefits as well as costs to having such a public platform. Everything she says and does is amplified because of the world's interest in the institution she leads. As much as her presidency gives her a platform to speak and be heard, it also gives her the platform to be misheard: “I worry about how what I say is going to be printed on the front page of the New York Times and how what I may want to give as a nuanced answer … can be tweeted or recorded partially or transmitted in a way that doesn't have what I would see as the full story.… That makes me anxious.” In effect, her role as a symbolic actor means her words and actions, for better or worse, become a part of the cultural public domain and are subject to different interpretations and representations by those who reproduce them. While leaders can control what they do and say, they cannot control how their actions and words are disseminated and perceived.
All this attention affords leaders great power but also creates personal burden. In Dallas, businessman Morton Meyerson feels self-conscious every time he pulls out his credit card, as people recognize his name from Dallas's Morton H. Meyerson Symphony Center, which his friend and former colleague, Ross Perot, named in his honor. Likewise, leaders who live in small towns—like Jim Owens, whose construction company, Caterpillar, supplies many of the jobs in Peoria, Illinois—become local celebrities. The attention makes Owens feel a bit “like Robert Redford”: “Everywhere you go and everything you do is noted, observed. Your compensation, of course, is front-page headline news when it happens. If you lived in Chicago or New York, nobody would care, but here it is headline news.”
When John Donahoe stepped into leadership at eBay, he instituted major changes that moved the site away from its original auction model. eBay users were furious with Donahoe, and they posted hate-videos on YouTube that compared him to the Nazis. To diffuse the tension when he appeared before 15,000 eBay sellers at a conference, Donahoe started his presentation with pictures from his childhood. He had to show them part of his humanity, moving beyond the state of merely being a figurehead without a personal story.
Leadership means representing your institution to employees, board members, customers, and the media—but also to your waitress, your housekeeper, and your mailman. A leader must consider how everything he does reflects on his organization. In fact, great leaders manage their personal actions with the same care as they manage their work. Most people have no idea of the toll this takes on leaders as individuals, on the people around them, and on their families. One of the great challenges of a leader is to be able to compartmentalize this toll so that she can carry on with her job.
Each spring, the president hosts the White House Correspondents' Dinner, a special event for White House reporters, media figures, and politicians that includes a “roast” of the president and his administration. On April 30, 2011, President Barack Obama was responsible for maintaining the light-hearted nature of the event by sharing the podium with comedian Seth Meyers. Hours earlier, Obama had come from a phone call with members of SEAL Team Six, during which he had wished them Godspeed in their mission to capture or kill Osama bin Laden. On the Sunday morning after the dinner, Obama would be gathered with his advisors in the White House Situation Room to watch the events unfold in Pakistan.
While President Obama was agonizing over the decision to send SEALs into harm's way a full day before he could announce anything to the country, he had to maintain a light-hearted, jovial demeanor for the public. This partitioning of emotions that was required of the president is unfathomable to most of us. Even on a smaller scale, intense situations often occur outside of the public's eye—a secret deal is on the verge of collapse, internal personnel issues have exploded, or a covert operation is being carried out—and yet leaders must maintain a demeanor of confidence and serenity.
In addition to being named the seventeenth national security advisor under President George H. W. Bush, Brent Scowcroft achieved an even more selective honor during his tenure in the White House: He was the first recipient of the Scowcroft Award, which the president then bestowed annually to “the person who fell asleep most frequently in meetings, and woke up pretending he'd never been asleep.” To this day, the award is proudly displayed in Scowcroft's Washington office with a picture of him sleeping on Air Force One. He was no narcoleptic; he was simply too busy to sleep normal hours. Indeed, the greatest toll on the lives of leaders I interviewed was the number of hours they work every week. Their average workweek is 68 hours, with a range of from 40 to 106 hours. As national security advisor, Scowcroft worked from 7:00 a.m. to 9:30 p.m.—more than 14 hours per day, week in and week out. Scowcroft's story is not unique among presidential appointees. While many of these leaders are government careerists like Scowcroft, serving for many years in public life, the four-year term of the presidency and the fast-changing tides of U.S. politics mean that practically every position in Washington is temporary. Most presidential appointees stay in their positions for an average of only two-and-a-half years, but with workdays that exceed 12 hours and little time for families, much less personal rest, who can be surprised with these short tenures?
Andy Card was chief of staff under President George W. Bush for five years. From Monday through Saturday, he was in the office at 5:30 a.m. and left at 7:30 p.m. at the earliest—sometimes staying until 10:30 p.m. And he was never the first to arrive or the last to leave. “There's always people at the White House,” he told me. A former deputy secretary of Homeland Security shared:
I usually headed home around seven, knowing I had an hour in the backseat of a car before I got home. So I was leaving home at five-thirty in the morning, and I was getting home about eight o'clock any given day. And that was six days a week and often a seventh day. At the end of that experience, I was physically, mentally, emotionally, exhausted. It was an endless, endless, demand on every facet of what you could bring to the table.
This heavy work schedule was consistent across the senior government leaders I interviewed; 88 percent worked all seven days a week. This is significantly higher than what I found among leaders in the business and nonprofit sectors. Fifty-seven percent of senior government leaders worked over 70 hours (that includes leaders from the last nine administrations) compared to only 43 percent of nonprofit and business leaders.
Leaders in government may work the longest hours overall, but the pace of life for leaders in business and nonprofit life is far from leisurely. New information technologies like smart phones and wireless Internet give the workplace more and more access to the private sphere.2 This accessibility makes it hard for leaders to escape the pressures of their jobs or the responsibilities of their roles.
Everett Spain, a White House Fellow from the Class of 2008 and former aide-de-camp to David Petraeus in Iraq, explained some of the reasons work becomes so all-consuming: “Usually one of my inner self-identities is to be able to outwork people.… I don't outwork them to outwork them; it's how I really contribute on a large scale. I'm not really smarter or more perceptive than a lot of people but I have been able to put together large quantities of useful work—productive work that makes an impact long-term.” The demands of these jobs are high, but the leaders I interviewed often had a unique drive to be productive. They also often associate their jobs with a moral purpose. Nearly a third of the leaders I interviewed described having a vocational calling of some sort. These people tended to be more likely to also mention making decisions with a broader picture in mind. On one hand, this means that these individuals have a powerful ability to contribute to human flourishing, but they do so in a way that takes a tremendous toll on them as individuals.
So the hours of the workweek are only part of the story. After a long career in the United States Navy, Admiral Dennis Blair was appointed director of National Intelligence. I interviewed Blair a year after his resignation from the post, and he described the many stresses of such a public and important role. Blair had been working 12 hours a day, but he shrugged off the time commitment:
That pressure you feel is not hours; it's responsibility. You can never do enough to try to do the right thing by the organization that you're in charge of. So any time that you have that spare mental minute, your mind is working on, you know, “What's something that we can do better?” or “What's an opportunity we can take advantage of?”… What people notice physically is when you get out of the job, you look so much younger and more refreshed.
Blair recalled living with this pressure as far back as when he commanded his first ship in the 1980s. The weight of responsibility seemed to increase with his rising rank, eventually manifesting itself physically. “I had terrible leg cramps in the middle of the night,” he told me, “maybe twice a week. I mean, just eye-watering pain.” Assuming that these might have revealed an underlying medical condition, I asked him how he was doing now (at the time of our interview). His response summed it up: “I haven't had them since I left.”
Another factor contributing to and resulting from stress is the aforementioned lack of sleep; two-thirds of the leaders I interviewed sleep six or fewer hours a night. During a string of student demonstrations, one college president I talked with averaged four hours of sleep a night and lost 30 pounds.3
The majority of leaders say their professional success has cost them something personally. One leader poignantly realized just what he had lost at his son's wedding rehearsal dinner: “He's talking about a memory of his mom teaching him to play catch and playing catch with him in the front yard. And I'm sitting there thinking, ‘That should have been me.’” In addition to the long hours, these positions come with heavy travel commitments. A surprising number of these top leaders work in a different city, state, or even continent from where their families live. Even leaders whose offices are in the same cities where their families reside can travel for as many as half the days in a year. When leaders travel this much or commute between cities, they can feel like “a person without a city,” as one put it, restless and never truly at home anywhere.
The combined forces of long hours, travel, and constant scrutiny leave leaders with little time or energy to invest in their personal lives. For women leaders I interviewed, this strain is particularly pernicious. In addition to their workload, women have centuries of traditional gender roles pushing them to be the chief relational investor in their families. So women in leadership positions find balance even harder to achieve than men do, and many chose to focus only on their careers. Only 64 percent of the women I interviewed were currently or had been married, compared to 96 percent of the men.
Early in her career, a female television executive I interviewed decided that she could not have it all—or more specifically, she could not have it all at the same time: “If I were to be married with kids, I could not do this job. And you can lie to yourself, but I know I couldn't. Right now I have the liberty to get on a plane whenever I want.” Whether most of these women in top leadership roles consciously choose career over family, the numbers compared to women in other jobs reveal that these high-profile careers inhibit their chances of being wives and mothers.4 One nonprofit executive explained to me that women professionals have to work harder, longer, and better, which “didn't leave a lot of time for other things.” When I asked if her professional success ever cost her something personally, she was quick to respond, “Oh sure, you mean like the day I woke up and realized I didn't have any kids? Seriously, yes.” Sixty-nine percent of the women in this study have children, compared to 94 percent of men. While feminism has paved the way for women to hold senior positions in our society, they still lack the personal freedom that allows men to manage both a high-powered career and a family. In The Second Shift, Arlie Hochschild reports that in marriages where both partners work, women are the ones who work “the second shift,” as primary caregivers on top of their work.5 If women in leadership positions are working both harder and longer than their male counterparts and more than other working women, they have little time or emotional energy to take on this second shift. And so women who manage to break the glass ceiling in the corner office can still find themselves trapped by traditional gender assignments at home.
A few women, however, appear to somehow manage it all. Anne Mulcahy, former CEO and chair of Xerox and mother of two told me, “I'm always really clear about this, that is, there's room for a big-time job, and there's room to be an active and engaged mother. There's just room for nothing else.” Indeed, among the few women I encountered who had very senior jobs and who had traditional family lives, practically all of them talked about having no hobbies or outside activities. In their estimation, there simply was not time.
Some women leaders spoke of rewarding marriages, but many more spoke of marriages that fell apart as their careers advanced. Women were nearly three times as likely as men in our study to have been divorced. Women were also less likely than men to mention a supportive spouse at home in our interview (even when accounting for the fact that fewer of the women were married). Marriage was also less likely to be mentioned as a part of the overall narrative of a woman's career path. This suggests that women in leadership continue to feel concerned that prevailing cultural norms about gender do not thwart their upward mobility or account for their ascent.
Leaders' families also feel the strain as their father, mother, or spouse is pulled away by a demanding job. One day, as Bill Roper left for his job as head of the Centers for Disease Control and Prevention in Atlanta, he was shocked to hear his three-year-old son send him off by saying, “Thanks for visiting, Daddy.” A surprisingly high number of leaders I interviewed have similar stories of realizing that their absence led their children to have extremely low expectations of them. New York Times editor Andy Rosenthal's son told Rosenthal that, “He understood that the New York Times was more important than he was. And that was what got me.” Nearly all the leaders I spoke with acknowledged the need to find balance between their families and their work, but they addressed the challenge in different ways and with varying degrees of success.
Many leaders strictly keep their work and personal lives separate. By compartmentalizing their stress, they protect their families from concern over work issues. The CEO and chairman of General Electric, Jeff Immelt, said, “What I like about my wife and my daughter is that they are not plugged into work-ish type things”:
I can't tell you the number of times my wife has said, “You didn't tell me you were going to do this deal where this person was going to get fired,” and I said, “I don't tell you a lot of things.” Because that's helpful to me that I don't have to bring work home.
In a similar vein, football star Kurt Warner has a policy that he does not sign autographs for fans around his family, because he wants his family to know that when he is with them, he is focused on being “Dad” and not an NFL star. These leaders feel that by protecting their families from their work, they preserve the sanctity of family time.
But other leaders find it far more helpful to integrate their work and family lives, intentionally blurring the lines between office and home. One executive shared with me that he frequently arranges to have his wife and children come with him on work trips: “I just try and involve them as much as I can, so that it's not seen as this scary thing out there that draws their dad away; it's actually something that they understand.”
Kevin Plank, the founder and CEO of Under Armour, is on the extreme end of the spectrum. Plank considers his personal and professional life “all one.” Not only does he consult his wife on things like personnel decisions, but he also involves his kids in his trade. Plank described a Saturday with his son: “Come on, we're going to stop by Dick's Sporting Goods, and I'm going to buy an arrow set for the house. Later we're going to go shoot bows and arrows, but we're going to sit there and watch people, see what kind of shoes they buy for two hours.”
For Plank, Under Armour is his mission (he's “building something great”), and he expresses his devotion to his family by involving them in it. Plank (and others like him) believes that he preserves his family by involving them in the preservation of his work. But there are painfully obvious trade-offs involved. He may be more present to his family than many whom I interviewed, but his presence is obviously sometimes a partial one.
To obviate these potential problems, leaders I interviewed engineered a number of strategies to preserve space for their families. Two things emerged across the interviews I conducted as the defining factors of parenthood: attending kids' sporting events and performances, and being home for dinner. Attendance at special occasions like kids' recitals and sporting events was usually not too difficult to swing, since these events come with advance warning. As the heads of their organizations, these leaders have a great deal of control over their calendars as well as access to tremendously helpful resources—like corporate jets—that the rest of us do not. But being home for dinner signifies their presence in their family's day-to-day lives and is much harder to achieve on a consistent basis. While some try to set aside the weekend as sacrosanct family time, three-quarters of these leaders still work seven days a week, meaning their presence at home is even more pinched. John Donahoe of eBay, however, has created a tradition of making pancakes for his family every Sunday morning.
Another businessman purposefully structures his meetings for early morning in order to come home sooner to be with his kids: “One of the things I learned early on is my teenage children didn't care where I was at 5 a.m.” But being home for dinner was paramount.
A majority of the leaders I interviewed cannot make it home for dinner every night or to every soccer game, even if they feel it is expected of them as parents. Many, then, are compelled to rework the definition of “father” or “mother” into something they can actually achieve. Like Donahoe with his Sunday morning pancakes, they create rituals and routines that allow them to continue in their demanding jobs and still feel good about their parenting involvement. By fulfilling regular expectations, they attempt to both satisfy their work requirements and demonstrate love and respect for their spouses and children. For example, one leader had a weekly date night with his wife and drove his kids to school every morning. During a career lull, one publishing executive took six months to take his kids on individual vacations around the world. Another businessman works in San Francisco but calls his family in Chicago every night at dinnertime. Another works out with his wife every morning. These are simple things—mere snapshots of family life. Yet by making rituals of them, leaders hope to elevate a nightly cross-continental phone call or a morning workout to evidence of fidelity and devotion.
Parenting requirements are not the only perceptions refracted by leaders' proximity to such consuming work. The lifestyle allowed by these high-paying jobs puts many out of touch with reality. Today's elite leaders enjoy personal benefits such as expensive houses, travel opportunities, and interactions with celebrities. And they share all these benefits with their families. As one businessman described, it really is the good life:
My personal success has enriched my life tremendously. My wife and I and my daughter have been around the world. I've taken them on trips with me. I've made so much money that we can do anything we want. My daughter can go to the finest school; we live in a beautiful house; we can do things for our parents and people that we love that otherwise couldn't be done.
Few leaders I interviewed talked so directly about the lifestyle perks of their jobs, but the evidence was all around us during the interviews: their expensive suits, mammoth homes, and expansive office suites high above the fray of America's metropolises. When one executive visibly revealed his frustration with my tardiness to our appointment on a rainy afternoon in New York City, I asked him about the last time he had hailed a cab in lower Manhattan in the middle of a storm. He immediately retorted, “That's why I always have a car and driver … so I don't have to keep important people waiting.”
The best leaders I encountered in this study recognize the symbolism of their actions, but even the most impressive ones I interviewed have become largely distant from ordinary people. They forget how unusual are the lives that they lead. One CEO ruefully related to me the story of meeting a man at a dinner party, and upon hearing that the man worked at Pepsi, asking if he knew Steve Reinemund (then the company's top executive). The man, who drove a delivery truck for PepsiCo, had never heard of Reinemund, and the CEO, embarrassed, quickly changed the subject. It is easy for these leaders to get so entrenched in the exclusive world of the global elite that they forget that most of us do not run in such circles. Nowhere is this entrenchment more obvious than around the touchy subject of executive compensation.
Debate about social equality well predates the birth of our nation; Jean-Jacques Rousseau wrote 250 years ago about the social contract that holds modern society together.6 Even though class distinctions have always divided us, the great accomplishment of the modern economic system has been the emergence of a robust middle class that did not exist in the medieval era or earlier. Economists such as Paul Krugman and Larry Summers and writers like Ben W. Heineman, Jr., have spoken out against excessive executive compensation as a particular threat to this system. They attest to its erosion of the moral cohesion that used to keep executives and laborers working for the same goal—profitability of the firm. The “Protestant ethic” that once facilitated Western capitalism has little to do with Protestantism today, nor is it much of an ethic when determining the divide between a firm's top-paid and lowest-paid employees.
And now, in an era of high unemployment and movements such as Occupy Wall Street, millions of everyday Americans are expressing their anger about the growing divide between rich and poor in our society. Since 1970, the share of income going to the top 1 percent of Americans has steadily increased, and in the economic boom from 2002 to 2007 that preceded the latest recession, incomes in the top 1 percent grew 62 percent while those of the bottom 90 percent grew only 4 percent. Even with the recent economic downturn, executive compensation has grown by an average of 4 percent per year for the past decade.7 Citigroup made headlines in the spring of 2012 when shareholders voted to withhold a $15 million pay package from CEO Vikram Pandit, “marking the first time that stock owners have united in opposition to outsized compensation at a financial giant.”8 Executive compensation packages include more than cash. Perks like country club memberships and personal use of corporate aircraft are highly valued.
Significantly fewer of the leaders in this study, however, endorsed such a cap. And opinions on the issue fell clearly along party lines. The Republicans—both inside business and out—were far more likely to resist government intervention in setting compensation guidelines. In fact, of the leaders I interviewed, three-quarters of those with Republican views believed there should not be a cap on compensation, compared to less than half of non-Republicans.9 According to a recent Gallup poll, 59 percent of the American public favors government action to limit the pay of executives.10
I conducted my interviews on the eve of the Occupy Wall Street movement, but compensation was already a touchy subject for the leaders I talked with. Many of them have been on the Forbes 400 list, the definitive register of personal wealth in the United States, and they used a variety of excuses to defend their positions. Most blamed the system.
Business leaders defend their high pay packages by citing the importance of economic incentives in a capitalist system. The founder of Home Depot and a former director of the New York Stock Exchange, Kenneth Langone described it simply: “It's capitalism, and if you leave it alone, it'll work. It'll work like a charm.” As the major stockholder at Yum! Brands, the world's largest fast-food company, Langone also makes sure CEO David Novak is very well paid—in 2012, Novak's pay package was valued at $29.67 million.
Novak, like other executives with high compensation, deflects responsibility for his pay: “I can't explain why I make so much money; I didn't create this system.” They attribute their sizable income to share value. As it rises, so also does executive pay. “If you have the right leader at the helm, it pays off in spades,” he explained. “I've made an awful lot of money, but I've also been blessed to be in a company that's grown our stock six times over the last 12 years.”
One banking executive says he understands people's frustration, but he disputes the Rousseauian notion of a social contract where compensation affects social solidarity: “We don't have a social responsibility, other than to conduct ourselves in compliance with the laws.… What I would say is that the better we do (living within the rules, obviously, and conducting ourselves in an ethical manner), the more jobs we create, and that serves America well.” So in this way of thinking, high executive pay should accompany economic growth. And it does, when CEO pay is based solely on stock value. But practically all executives receive base salaries as well, and over the past four years, those base packages have not followed the economic downturn.
Other business leaders say that CEO pay should not only be based on stock value, but also on the significance of the CEO's performance in determining that. Former secretary of the Treasury and CEO of Alcoa Paul O'Neill puts it this way:
I like the idea of stock options that produce significant value if the enterprise significantly outperforms the competition.… A company can make a lot of money, but it may just be in a virtuous cycle for the industry. That's not a good reason to pay an executive a whole lot of money.… They should get paid for the difference that they make, not for the good fortune they have in happening to be in the right place at the right time.
Dozens of business leaders talked about the complexities of setting executive compensation, citing the role of outside consultants, executive search firms, compensation committees staffed by board directors, and performance-incentive packages. This process of diffusing responsibility for executive pay has not only spawned a number of cottage industries around compensation questions but has also produced rampant growth in CEO pay. Whereas earlier generations of capitalists set their own income—and therefore had to take public responsibility for it—the current generation has been able to depersonalize its involvement in the process, allowing pay packages to continue to grow despite increasingly strict disclosure obligations of public companies and subsequent public outcry. In essence, we have created a mechanism for tremendous growth in CEO pay without individual accountability.
The trend toward higher CEO pay has even infiltrated the ranks of the country's leading nonprofits. In 2010, four U.S. senators refused to approve a large package of federal grants for the Boys & Girls Clubs of America after discovering that the organization's CEO, Roxanne Spillett, had earned almost $1 million in compensation in 2008. Senator Tom Coburn was one of many who criticized Spillett: “A nearly $1 million salary and benefit package for a nonprofit executive is not only questionable on its face but also raises questions about how the organization manages its finances in other areas.”11 The senators' critiques were especially poignant, because at the same time that Spillett was receiving this pay package, Boys & Girls Clubs were closing across the country as philanthropic dollars evaporated in the economic downturn. Spillett, who has worked various positions at Boys & Girls Clubs since the 1970s, was chastened by these criticisms. She told me, “I feel a huge sense of responsibility for our local clubs, and so, if [my compensation and the news attention it generates] is in any way, shape, or form hurting our clubs … it's like a punch in the gut.” In response, Spillett asked her board to discontinue all retirement payments, which were a large part of her total compensation package. Actions such as hers have helped to calm some of the criticisms of nonprofit executive pay, but they are virtually unheard of in the private sector.
Other leaders revealed little understanding of why their compensation would be perceived as a problem. When I interviewed 55-year-old Jamie Dimon, he had gone totally gray, but he still had ruddy cheeks and was teeming with energy. He is warm, engaging, and incredibly smart. After spending time with him, I understood why he is the most respected and liked bank executive around.
Dimon first made history when he helped his mentor, Simon Weil, build CitiGroup, the first behemoth financial-services conglomerate. He made history again when, after a break with Weil, he rose to become JPMorgan Chase's chairman, CEO, and president and guided the bank through the previous decade's financial meltdown. Legend has it that when Dimon was a boy, his father asked him what he wanted to be when he grew up, and Dimon was quick to respond, “I want to be rich.”12 He had certainly achieved that goal when I met with him, sitting in the conference room of the executive suite on the 48th floor of 270 Park Avenue. The wealth of the place hung in the air as I asked Dimon about his pay package—which had neared $110 million over the previous five years. He compared executive compensation to the pay packages given to celebrity athletes. From his perspective, the high income of executives was in no way to blame for the low wages of others. As he put it, “I think a bigger crime isn't that CEOs make a lot of money but that inner-city-schooled kids don't have the chance to compete.” Dimon has been vocal in many news outlets about his right to wealth as a result of hard work and success; wealth has, after all, been his goal since he was a boy. But Dimon, like other executives, is unable to see what the situation looks like outside of the gilded halls of Wall Street. Years ago, when Dimon told his family that he had been fired as the president of CitiGroup, his young daughters were very concerned, asking if they would have to live in the streets and if they could still go to college. Dimon reassured his daughters—bank executives, even those who have just been let go, do not have to worry about living in the streets.
Randall Stephenson of AT&T also sees little wrong with the system if an executive generates wealth for shareholders: “The only morality issue I perceive is, ‘Is there an executive taking advantage of [the system]? Is there an executive whose performance did not warrant that level of compensation?’” Yet even Stephenson recognizes the need for limiting some executive perks. In 2008—at the start of the recession—he waived his $3 million bonus. It is a matter of “fairness … equity,” said Stephenson. As long as employees “believe you're in the boat with 'em, I don't think there's a big resentfulness [about] how the shareholders choose to pay me. But I think if they see me [getting a bonus] and they're getting hammered [by lower pay], then that's not right. I just kind of think we're all in this together.”
One businessman struggles because he knows intuitively that the system is wrong, but he does not know what to do about it. He blames the marketplace for determining executive compensation, explaining that he would've done his job if the compensation were one-tenth of what it was, because he found the work interesting. “But I would not have felt good about that,” he admitted, “if everybody else was making 10 times more than me doing the same job. That's where the human nature part comes into play.” He was refreshingly forthcoming in his personal thoughts, “We all sort of know it intuitively. We know it in our gut, there's something wrong here. But we don't know what to do about it.”
Other business leaders also acknowledged problems with the current system, but most of these leaders do not see their compensation appears to the rest of their fellow citizens. Their work requires so much of them—more time, more commitment, more sacrifice—that they become accustomed to this excess in all areas of their lives.
The common conception is that these leaders are in it for the money. But I found that while money and status probably play a bigger role than leaders verbally acknowledged, the overwhelming majority are driven by much stronger forces. These leaders embrace their work much more than they do the leisure and freedom allowed by their paychecks. As one person explained, “It wasn't about making money … I didn't even think about it. It wasn't about going up in an organization. I always just wanted to make a difference in people's lives.”
Eighty-six percent of the leaders I interviewed specifically expressed that they loved their jobs. In the words of Jim Turley, chairman and CEO of Ernst & Young, “It's a relatively intense life, and if I didn't love it, then I couldn't do it, because it takes a toll.… But I get more out of it than I feel like I put in.” Rather than being drained by the hours, the attention, and the responsibilities, these people are inspired by them. They love the larger-than-life role they are called to take on. They have to love it in order for it to be worth the sacrifice. A U.S. senator told me, “People ask, ‘So what's it like to be a senator?’ and my answer is that it's more. M-O-R-E, more. It's more of everything. More fulfillment, more reward, more frustration, more stress, more of the best and the worst of life in every way you can imagine.”
Other leaders communicate their vested passion in their work as an ingrained trait. “If you're high-octane people, you're high-octane people,” said Doris Meissner, former Immigration and Naturalization Service commissioner in the Clinton White House. “I work hard. Well, I've got to face the fact, I must love it. And if I wanted more balance in my life, I probably could have it. But … if you like intensity, you like intensity.” Apple chairman Arthur Levinson works because he is afraid of wasting his limited time: “Ever since [I was] a little kid, if … I've wasted the day, I'll dream about it.… There's something deep-seated in my brain that does not allow me to live a casual life.”
After graduating from the Wharton School, former University of Pennsylvania fullback Robert Wolf had every intention of becoming a doctor. After taking the MCAT, he decided to go on a few practice interviews in preparation for interviewing for medical school. But everything changed for Wolf when he walked onto the Salomon Brothers trading floor at 1 New York Plaza. “Huge electricity in the air, a lot of energy,” Wolf described it. “I'm a naïve 20-year-old kid, and I'm thinking, ‘Oh my god, what a great environment to work in.’… It was just an environment where I said, ‘This is where I belong.’” Wolf recalled leaving the interview and calling his mother to tell her, “Med school was a great dream, but I found what I want to do.”
Wolf abandoned his medical school plans and took a job at a different bank-holding company that offered higher pay, but he found the environment a far cry from the excitement he had experienced at Salomon Brothers: “I get there at 7:00 a.m., and no one's there till 9:00 a.m. And [later] it's like, the bell rang at 5:00 p.m., and everyone was ready to leave.” Wolf wanted to experience the long hours and intensity of investment banking. So after nine months, he “literally begged Salomon to get into their next training class.”
He spent 10 years at Salomon Brothers before joining UBS AG, a Swiss global financial services company and one of the largest managers of private wealth assets in the world.13 Wolf rose through the ranks at UBS, becoming president of UBS Investment Bank in 2004 and chairman and CEO of the UBS Group Americas division in 2007. When I asked him if he still loved his work in the industry that had lured him away from his intended career, he paused for a long time before replying with the reason why his answer is yes:
There isn't a day I don't open the paper [and] relate it to something in our industry. Whether it's with oil or there's a war going on, or whether it's what's going on in a political party or where we are with taxes, or currency, or what we're doing in China, or free trade. There is not another industry, in my opinion, that can tangentially be part of everything that's going on in this world.
These factors—the energy and excitement, the people at the top of their game, and the relevance to world events—are what many platinum leaders love about their work. And it does not always require personal sacrifice. Instead of seeing his busy work life as a detriment to his marriage and family, Wolf considers aspects of it a blessing. “If you are financially secure, it probably removes 80 percent of the tension points in a marriage,” he pointed out. While the 2008 recession hit everyone, rich and poor, to some extent, Wolf said his family avoided feeling its sting since they have always lived well below their means. He and his family only have one home, and it is the same first house they bought in 1993.
It is clear that the intense lifestyle of leading a major enterprise is too costly to be about something as small as money. Leaders lead because they are passionate about what they do. As Jeff Smisek, the CEO of United Airlines succinctly put it: “I don't really not work. I don't have a life.… With telecommunications as they are, and BlackBerries, you're pretty much working around the clock. But that's okay, because my kids are grown, my wife has a job, my dog is okay—and I love this business.”