There seems to be a general understanding that the only thing that drives CEOs is money. Therefore people heavily scrutinize the enormous salaries and huge benefit packages that CEOs get, even when companies seem to perform poorly under their management. There is a great article on BusinessWeek online that talks about the psychology of CEOs.
Most will argue that it is money and power that drives CEOs, but I think most overlook the most important motivator: the rush that comes from winning. I’m mean let’s face it if you are worth over a hundred million money can no longer be a real motivator, at least not for most people. Why does Michael Schumacher, formula one driver, keep putting his life on the line? Why do top athletes keep putting in so much effort? Everyone knows it’s not the money but their need for victory. Why would this be any different for CEOs.
Beating the crap out of the competition, being a rival business, another racing team, or the world number one track runner, that’s what drives these people. They are the best of the best and the only thing that matters to them is becoming the best they can be. Of coarse the pay also plays a role but it’s not the only thing that drives them.
In today’s hyper competitive business world a lot of corpses are left behind on the battlefield. Executive turnover is spiraling out of control and corporate scandals are becoming a daily phenomenon. That is the risk CEOs have to take and that is why I think there is nothing wrong with paying them enormous salaries. Of coarse it is crucial to link pay to performance, but corporations will have to keep increasing pay if they want to get the top performing CEOs. The next question is: How do we define performance?