Workforce Management: Why should HR executives be concerned about the levels of executive compensation?
Robert Monks: Peter Drucker used to get very impatient with me about my talking about CEO pay. He would say, "Bob, you don’t understand the problem. The problem is that this has destroyed the teamwork between the people coming up in the company and the top people." HR is the place where rubber hits the road on this.
WM: Do you think employees will start looking at executive compensation issues when choosing where to work?
Monks: I do think companies that have employment practices that are partnership-oriented are going to be much more attractive in terms of getting people to work there. I think for people to go work at a place where they have opportunity to be a partner in building something—well, that’s a very attractive prospect. Whereas going to a place where someone clearly has an advantage over you and he is going to be the boss over you is less attractive.
WM: Is there an opportunity for HR executives to work with shareholders?
Monks: I would hope that companies would come to a viewpoint that working with shareholders is a very important corporate objective. For example, Coca-Cola for years had very good HR people assigned to work with shareholders. As a result, they have been able to get through some very difficult situations with very little public adverse reaction to their reputation. Whereas when you file a shareholder resolution at Exxon, you don’t get a call from someone asking, "Can we talk about it?" You get a letter from a lawyer saying [what you are doing] is illegal. The contrast is sharp. Having long-term informed shareholders is in the company’s best interest.
WM: This year there have been a few shareholder proposals asking that shareholders be more involved in companies’ succession planning. What are your thoughts on this?
Monks: I think shareholders probably ought to have periodic access to management to make suggestions and nominate people. But shareholders aren’t competent to make the choice of who should be the principal executive of the company.
WM: Public companies often complain that they can’t invest in workforce management practices to the degree that they would like because shareholders are pushing them for short-term results. How do you respond to that?
Monks: Forty percent of ownership of American companies is by index funds or people who are constructively index managers but don’t want to admit it for fee purposes. That means they are permanent shareholders. There is so much talk about how much stock is bought and sold on a short-term basis. But for most companies, 40 percent of their stock owners are going to be the same people in and out, and they can very well count on that.
Workforce Management, March 3, 2008, p. 11-- Subscribe Now!