Big shots in business now have diminished authority

It is not surprising that corporate executives believe that they are important.

Frequently, they are courted by politicians for ideas or for financial backing. The media are eager to talk with them, and their comments are quoted. It is not uncommon for their faces to appear on magazine covers. Of course, they command huge salaries.

Then also, some 20 years ago bosses were much more able to do as they pleased, but not so today. Subsequently, the “defrocking” of those executives greatly diminished their authority as well as their image. Those chief executive officers  often are referred to as “embattled CEOs.”

Illustrating change is the reduced tenure of corporate chiefs. Twelve years ago those bigwigs remained in their posts for an average of 8.3 years, but now that is down to 6.6 years. Obviously, that does not provide them with sufficient time to influence much of a company’s direction or actions. That is depriving them of an opportunity to prove themselves.

Another development nowadays is that fewer corporate leaders act as chairmen of their boards, clearly curbing their means to direct company affairs. A management consulting firm has reported that the proportion of CEOs who are the chairmen of their board has fallen sharply. Also, when questioned about their own self-appraisal, disappointment was evident.

Needless to say, company executives still are able to reward themselves financially, almost obscenely. Yet, more pressure groups are demanding that shareholders have a voice in the pay of corporate officials. The clamor against excessive salary and bonus compensation has risen significantly, and shareholders’ resolutions protesting that have become commonplace.

Hitherto, shareholders were a disparate lot with little input on the company’s activities. Now, according to the latest data, the proportion of stock in a publicly traded company held by institutions has climbed from less than 40 per cent ten years ago to more than 50 per cent. Furthermore, the succession of corporate scandals has activated shareholders to put executives on a “hot seat.”  Then, too, large shareholders such as hedge funds constantly are intervening in company affairs, questioning and criticizing many decisions.

Board of directors formerly were appointees of the chief executive, often friends or acquaintances beholden to the person who appointed them.

They were likely to accept decisions handed down by CEOs. Now more directors are outsiders who assert their independence.

While company executives can derive some satisfaction from their salaries and bonuses, they now must contend with the many frustrations that inhibit their freedom.



Bruce Whitestone