By George Anderson
Labor, for most businesses, is the major expense. So, when a company feels a need to reign in costs, labor is often one of the first areas looked at to cut back.
In some cases, that means layoffs, with the remaining staff being left to do the work done by more hands before. In others, it means laying off high-priced domestic workers and outsourcing jobs to lower paid workers elsewhere.
In her Wall Street Journal In The Lead column, Carol Hymowitz wonders if perhaps it isn't now time, in the search for lower labor costs, for companies to start laying off their domestic CEOs and outsourcing the function to lower-paid executives in other countries.
Ms. Hymowitz points out that the median annual salary and bonus for U.S. chief executives was $2.3 million in 2004. Compare that to the $1.2 million paid to CEOs in the U.K., $857,000 to top execs in France and $386,000 paid to counterparts in Sweden.
Chief executives in Asia are paid even less, according to Mercer Human Resources Consulting, with the average for top companies in Japan being $317,864; $302,078 in Hong Kong; $263,301 in Singapore; and only $88,117 in India.
The numbers are compelling for going overseas to fill top executive positions and, perhaps, writes Ms. Hymowitz, it is time to consider this option.
If not that, she posits, then boards of companies need to establish rational compensation packages for employees in the executive suite as well as those who make up the rank and file.
She writes, "What is galling is how rarely, even in a time of heightened governance sensitivity, compensation is linked to performance. Newly named CEOs are guaranteed a trough of money before they've done any work. When they fail and are dismissed, they are handed even more money."
Moderator's Comment: What is your reaction to Carol Hymowitz's article suggesting perhaps it is time to begin outsourcing the chief executive (and logically other functions) to other countries where compensation is lower? How does the retail industry measure up for rational compensation packages throughout organizations? Are there companies that are models for how workers at all levels should be paid? - George Anderson - Moderator