CEO the Great and Powerful

It’s easy to criticize the stupendous salaries of CEOs like Michael Jeffries of Abercrombie & Fitch, who last year made $48.1 million in total compensation. Jeffries’ salary places him among the elite in retail and also in the broader world of business. He ranks alongside such iconic founders as Larry Ellison of Oracle, Rupert Murdoch of News Corp., and Howard Schultz of Starbucks, as well as CEOs of mega-companies like GE, Ford Motor and Boeing.

But Jefferies must have earned his salary as a reward for making money for his shareholders, right? Possibly. Abercrombie’s stock price is virtually the same today as it was a year ago and substantially lower than two years ago. Hmmm. Maybe the reward is based on net income? Net income for the last fiscal year was approximately 5% of gross revenue, which is fair but not exceptional, although it is an improvement over the previous two years which were much lower. Hmmm.

So, why would CEOs who perform perfunctorily get rewarded like kings?
Clearly CEOs are in a different class than other employees and any discussion of salaries is not confined to stock price, revenue figures and profit performance. Many other factors figure into the equation, and by some of these measurements Jeffries and other CEOs deserve credit.

When Jeffries took over at Abercrombie he was quoted as saying he wanted the brand to “sizzle with sex” and his vision has lifted Abercrombie to many years of growth and success since he became CEO in 1996. So vision is important.

So are some other key factors including leadership, charisma, persuasiveness, competitive differentiation and negotiating skills. So are morale building, fiscal management, innovation, change management, decisiveness and many others

But what about such qualities as being inspirational and skillfully inclusive? What if these were linked to corporate performance and salary?

A recent survey released by Glassdoor measured these factors and also included employee approval ratings in a top-50 CEO ranking.

A common denominator for all the retail CEOs on the list was a track record of pushing their company’s stock prices sharply upward over the last two years. The top retail CEOs on this list are: Jeff Bezos of Amazon (number 16), Blake Nordstrom of Nordstrom (29), Glenn Murphy of the Gap (39) and Frank Blake of Home Depot (40).

Of this stellar group, all of whom have delivered outstanding value to their company’s shareholders over the last two years, none appear on the top-10 list of highest paid retail CEOs. Go figure.