Why CEOs Should Explain Their Pay to Employees

A management expert suggests a solution to outrageous executive compensation packages.

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Management expert and author Patrick Lencioni has a solution to exorbitant executive compensation packages: Healthy shame.

Actually it's really more like in-your-face accountability that would likely involve a little shame. Lencioni writes in the Table Group letter this morning that executive pay probably has less to do with individual need than it does with the Joneses, as "CEOs know what their peers earn, and they want to compare favorably for the sake of their egos more than their bank accounts," Lencioni says.

He suggests that executives of public companies account for their pay in a few ways:

1) A twice-a-year "on-line town hall with video coverage in which employees can anonymously and respectfully demand an explanation" for the compensation package.

2) A mandatory E-mail signature inclusion. His example:

Fred Johnson

CEO, XYZ Corporation
Phone: 212-555-1212 e-mail: fred@xyz.com
Compensation: $2.5 million salary, 12 million stock options, $1 million guaranteed bonus 3) CEOs who take home megabonuses after a lousy year "should be forced to sit in the lobby of the company’s building for two weeks and endure the reaction of employees."

He also thinks analysts and reporters should do a better job of asking top executives about their pay packages. I suppose they could learn a bit from Rep. Henry Waxman.

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