in general those rules and protocols serve a value and most companies try to do it right. they aren’t failsafe but patterns do tell a story. So I’d agree that year after year of good performance, consistently meeting targets, a match between targets and performance - they are all signs of something being right.
however that may also hide internal problems for many years. My work has bought me into contact with many of Australia’s largest companies over many years. Self belief can be a good thing but it is easy for a culture of complacency to ensue. From that can emerge a culture of compliance and bureaucracy where the very things that once made the company great begin to undo it. A rigid senior management, being out of touch, spinning wheels. I’ve seen it all.
Take Newcrest and it’s rise and then the fuss in 2013. It was predictable. Check what happened to the CEO who had been the golden CEO determined to have Lihir no matter the price. In 2015 he was sacked from Orica for his aggressive behaviour. He’d been like that for years and his bullying behaviour had left its mark on Newcrest. But he had got away with it and been paid very handsomely because things “looked” good.
the fading of AMP was sort of inevitable. It had become tired but like a freighter it took years to lose its sheen. Check the grossly overpaid george Trumbull who was eventually dismissed from AMP and has complained about them ever since. He didn’t fix the issues that were there and created a whole series of others.
check the skilled group. A Brilliant and talented and funny CEO doesn’t necessarily mean that a few golden years will be sustainable - and they weren’t.
I could go on through banks, manufacturers and other sectors and the same pattern exists. Some recognise what is happening and arrest the rot. Others just can’t help themselves.
The trick is to either recognise when the rot is setting in and fix it or to avoid the rot in the first place. That goes for investors too.
there is however plenty of research on the relationship between CEO pay packets and performance. The correlation is not there. The use of incentives does not guarantee performance and can lead to distorted behaviour. often the bigger the disparity between ceo pay and that of the workers the more likely it will be to unravel.
george Trumbull was one of the early CEOs on pumped up salaries. Others followed. I always had a view that it was in the interests of the search firms to pump up salaries as well. After all they made their money on the basis of a percentage of the placement fee. On the 90s they started to earn eye watering figures as the rates for executives moved upwards, mirroring the US and always on the basis of how important it was to attract “the best” not factoring in that it also attracted narcissists and climbers and self satisfied charlatans.
that doesn’t mean that I think much of the absurd notion that the ones who deserve the high pay are the cleaners and clerks and whatever. I do think that their rates are problematic for performance but that’s another issue. In fact I think that anyone who suggests that as a class CEOs and managers should be abolished of regarded as a waste of space simply shows that any claims they have made over years to being successful and smart might be looked on as a heap of self serving garbage and twisting of the facts. One can only wonder at the level of jealousy that must swill around their head.
