Nonprofit bosses show corporate brass how to sacrifice

May 05, 2010|By Jay Hancock

Battered by a poor economy and declining endowment, the Walters Art Museum balanced its budget last year by laying off seven people, eliminating another nine open positions and cutting the pay of those remaining. Including that of the boss.

Museum Director Gary Vikan took a haircut of about 8 percent from his salary that's reported in tax filings in the $250,000 range — the largest pay cut in percentage terms of anybody in the organization.

As well he should have. Everything psychologists know about organizational behavior says that the best leaders share what sacrifices need to be borne by their team. Baltimore's nonprofit organizations have learned the lesson.

So where are similar give-backs among the CEOs of the Fortune 500? Perhaps all we need to know about this economy is that, at this time of America's greatest financial pain in 70 years, sacrifice among the for-profit, corporate elite is hard to find.

Bailed out by taxpayers, Wall Street executives and traders pocketed bonuses of $20 billion last year, a 17 percent increase from 2008, according to the New York state comptroller. The average bonus was $123,850.

True, average pay for 200 CEOs at the biggest U.S. companies declined by 15 percent last year to $9.5 million, according to analysis commissioned by The New York Times. The average cash payment fell by 5 percent, to $3.8 million.

But this is basically business as usual. Compensation at the highest corporate levels fluctuates with results reported to shareholders. In any case, a $9.5 million paycheck isn't a hardship case, no matter what your pay was the year before.

And even that figure masks the enormous gains that executives will make on the backs of people they've been firing. Whatever top bosses lost last year, they'll get it back tenfold from pay tied to cost savings and rising stock prices.

Meanwhile, at Catholic Relief Services in Baltimore, President Ken Hackett reduced his pay by 10 percent for several months last year as the international aid organization eliminated dozens of positions. Other Catholic Relief executives saw pay shrink by smaller amounts.

Top executives with the Baltimore Symphony Orchestra took pay cuts of up to 15 percent. Music Director Marin Alsop donated $50,000 to a BSO relief fund after giving $100,000 to start the symphony's music education program for kids.

Baltimore Museum of Art Director Doreen Bolger took a 10 percent salary cut as employees were furloughed for two weeks.

It's the code of honor embraced by Army commanders who know they must put themselves "first in the firing line, last in the chow line" if they want troops' respect. Leaders seeking credibility share hardship and lead by example.

"I can't inflict pain on somebody else if I'm not taking pain myself. It just isn't fair," says the Walters' Vikan, who has assumed the duties of chief curator, a position that had been vacant, in addition to his director job.

"With the prospect of losing staff members and staff positions, and having staff take over other responsibilities — the first step toward that outcome was sacrifice beginning at the top of the organization," he said. "Just to maintain a sense of wholeness."

Over on the for-profit side, Stanley Black & Decker began the first of 250 layoffs last week at Black & Decker's former headquarters in Towson and other Maryland facilities. Thirty-seven people were shown the door.

But former Black & Decker CEO Nolan Archibald isn't sharing their pain. He's getting rich from it. (Richer, to be precise.) As part of his deal to sell Black & Decker to Connecticut-based Stanley Works, Archibald negotiated a payoff of potentially $45 million or more linked to cost cutting at the combined company.

As the merger stands to put thousands of Stanley Black & Decker employees out of work at offices worldwide, Archibald plops down comfy in the executive chairman seat at the combined company. That's profiteering, not leadership.

Weeks after the sale was announced, Archibald tried to tell employees how great it was. Big slides beamed "world class" and "stronger global company."

"You will be proud to be part of this global marketing powerhouse," he told the workers, according to a transcript filed with regulators. "For the vast majority of Black & Decker employees who will continue with the combined company, this will be very good for you."

This is the lesson that corporate America needs to hear. Archibald's employees might have believed him, might have respected him and pledged to work hard on the merger, if he hadn't put himself last in the firing line and first in the chow line.

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