Bloomberg Opinion reposted this
Tesla CEO Elon Musk’s recent $29 billion stock award is staggering — not just for its size, which exceeds the GDP of over 70 countries, but because it epitomizes a troubling trend: boards granting enormous equity to CEOs who already own a vast amount of stock in the company. The logic behind these mega awards is supposedly to incentivize performance. But on closer examination, this rationale falls apart. CEOs like Musk already own stakes worth hundreds of billions. Doubling company value doubles their wealth. If billions more are needed to motivate them, the entire premise of incentive compensation collapses. Similar mega grants have been awarded to other executives — from Figma’s Dylan Field to Broadcom’s Hock Tan and Warner Bros. Discovery’s David Zaslav — many of whom were already multi-billionaires. These packages often serve more as status symbols within CEO peer groups than as genuine motivators. Beyond the wasteful excess, these awards encourage the wrong behavior. Research shows that narcissistic CEOs, who often seek self-aggrandizement, lead companies into greater performance volatility and risk. Boards should be wary of enabling such traits. What can boards do? First, remember their primary responsibility is to shareholders, not the CEO. They must exercise firm judgment and say no to unreasonable compensation demands. More importantly, they should seek leaders who are passionate about their work — not just their wealth. Legendary CEO Alan Mulally, who signed his letters with a sketch of a smiling jumbo jet, exemplifies this ideal. His love for engineering and products drove his success more than money ever could. Boards have the chance to identify such leaders, especially from within their ranks. They should seize it. Mega CEO pay packages may dazzle headlines, but they risk blinding us to the deeper truth: great leadership demands commitment to purpose, not just profit. Read the full article on Bloomberg Opinion: https://lnkd.in/eU-ibJWF