By Rick Gould, CPA, JD
Our 2011 Billing Rates & Utilization survey clearly showed that firms are focusing on raising rates. Billing rates are now averaging $513 per hour for CEO’s of agencies with $25 million or more in revenues, and $291 among smaller agencies, Agency VP’s average $261, with the highest among Washington DC agencies averaging $306 and SVP’s $356. I believe this uniform spike in billing rates is indicative of a marginally improved economy and is consistent with growth of the industry in both net revenues and operating profit.
Productivity, measured by billable time utilization has been far below optimal levels. Senior VP’s are billing out only 63% of their theoretical yearly capacity of 1700 hours. And while some rank and file account managers are averaging as high as 99%, some are averaging as low as 70%. The goal for account executives should be at least 90%, a goal reached by almost all firms achieving 20% profitability.
For our full report please email me at rgould@stevensgouldpincus.com
Monday, August 1, 2011
Friday, May 27, 2011
The Myth of the CEO President (of the U.S.)
By Rick Gould, CPA, JD
It was not surprising to learn this week that Donald Trump finally decided not to run for president. I, for one, never expected him to run; too much to lose, too little to gain.
I respect and admire The Donald for his entrepreneurial energy and his razor-sharp ability. Thinking big and turning adversity into business triumphs are his strong suit. He has created a brand second to none. The legacy of his name is a cash-cow. His buildings are among the highest quality. He has done much for New York City. He is a creator, an innovator, a true visionary. The list goes on.
I am happy for him to continue in this role, as well as in his very lucrative prime-time role in “The Apprentice” and “Celebrity Apprentice”. (Yes, I’m a viewer.) However, his idea of a CEO President, in my view, is a dream. A myth. Far from reality. Let me explain.
His concept is fueled by wealth, power and, yes, a very large ego. It is further fueled by those who support him and by people who want to identify with him, and with the buzz. With the glamour and excitement. These things are subordinate to what a successful president really needs to be focused on. Does The Donald, or any other high-profile CEO, really have the humility to put this aside in fulfilling the job description of U.S. President?
Many dynamic and successful corporate CEO’s dream of ascending to high political office. In addition to Mr. Trump, there is Mitt Romney - a founder of Bain Capital in Boston (for President), Carly Fiorina - former CEO of Hewlett Packard (for Senator of California), and Meg Whitman - former CEO of E-Bay (for Governor of California) to name just a few. But can these CEO’s and former CEO’s withstand the media and public scrutiny that comes with the territory of running for elected office? Can they handle the requisite financial disclosure, the dirty laundry and skeletons in the closet being aired? The divorces and love-children playing out in the media? The incredible number of political surprises and resignations from candidates and elected officials of the past few years shows running for any office a challenge, one that is well beyond an accumulation of votes. The possibility of being smeared by the media, right or wrong, true or untrue, always exists.
I, being a product of the business world, wonder if these successful CEO’s can truly run the country as well as their own companies. Would they be as effective as a CEO President as they are as Chief Executive? It takes extremely different skill sets to run a country. In addition to their charisma, which they all seem to have, being President requires diplomacy and the ability to inspire and engage people of all walks of life... both friends and enemies. The Chief Executive is not accountable to voters, only to his/her board of directors and investment bankers. The President is accountable to his/her cabinet, to congress, to special interest groups… and ultimately to the voters.
Few American Presidents have the background, experience and ability to run a large Fortune 500 company. And even fewer CEO’s have what it takes to handle the realm of personal exposure a presidency brings. Those who believe that our country can be run like a corporation and by a corporate Chief Executive are in for a long wait. I doubt if it will ever happen.
It was not surprising to learn this week that Donald Trump finally decided not to run for president. I, for one, never expected him to run; too much to lose, too little to gain.
I respect and admire The Donald for his entrepreneurial energy and his razor-sharp ability. Thinking big and turning adversity into business triumphs are his strong suit. He has created a brand second to none. The legacy of his name is a cash-cow. His buildings are among the highest quality. He has done much for New York City. He is a creator, an innovator, a true visionary. The list goes on.
I am happy for him to continue in this role, as well as in his very lucrative prime-time role in “The Apprentice” and “Celebrity Apprentice”. (Yes, I’m a viewer.) However, his idea of a CEO President, in my view, is a dream. A myth. Far from reality. Let me explain.
His concept is fueled by wealth, power and, yes, a very large ego. It is further fueled by those who support him and by people who want to identify with him, and with the buzz. With the glamour and excitement. These things are subordinate to what a successful president really needs to be focused on. Does The Donald, or any other high-profile CEO, really have the humility to put this aside in fulfilling the job description of U.S. President?
Many dynamic and successful corporate CEO’s dream of ascending to high political office. In addition to Mr. Trump, there is Mitt Romney - a founder of Bain Capital in Boston (for President), Carly Fiorina - former CEO of Hewlett Packard (for Senator of California), and Meg Whitman - former CEO of E-Bay (for Governor of California) to name just a few. But can these CEO’s and former CEO’s withstand the media and public scrutiny that comes with the territory of running for elected office? Can they handle the requisite financial disclosure, the dirty laundry and skeletons in the closet being aired? The divorces and love-children playing out in the media? The incredible number of political surprises and resignations from candidates and elected officials of the past few years shows running for any office a challenge, one that is well beyond an accumulation of votes. The possibility of being smeared by the media, right or wrong, true or untrue, always exists.
I, being a product of the business world, wonder if these successful CEO’s can truly run the country as well as their own companies. Would they be as effective as a CEO President as they are as Chief Executive? It takes extremely different skill sets to run a country. In addition to their charisma, which they all seem to have, being President requires diplomacy and the ability to inspire and engage people of all walks of life... both friends and enemies. The Chief Executive is not accountable to voters, only to his/her board of directors and investment bankers. The President is accountable to his/her cabinet, to congress, to special interest groups… and ultimately to the voters.
Few American Presidents have the background, experience and ability to run a large Fortune 500 company. And even fewer CEO’s have what it takes to handle the realm of personal exposure a presidency brings. Those who believe that our country can be run like a corporation and by a corporate Chief Executive are in for a long wait. I doubt if it will ever happen.
Saturday, January 1, 2011
Financial Injustice
By Rick Gould, CPA, JD
The Securities & Exchange Commission and the Financial Industry Regulatory Authority (FINRA) have imposed massive changes, licensing requirements and continuing education accountabilities on financial industry professionals.
What amazes me, though, is how little has been accomplished by the Justice Department in prosecuting those guilty of corporate abuses for personal gain since the debacles of Enron, Worldcom, Tyco and others of the early part of this decade. Only a select few have gone to prison.
Are today’s cases more complex than Enron or Worldcom or Tycos? And we were successful in convicting Enron’s Ken Lay, Chairman, Jeff Skilling, CEO and Andrew Fastow, CFO? We convicted Bernie Ebbers, CEO of Worldcom and Dennis Kozlowski, CEO of Tycos. All are serving prison terms, other than Mr. Lay whose premature death, before sentencing precluded the humiliation of prison.
And Bernie Madoff got his rightful fate, a 150 year sentence, after turning upside down the lives and financial stability of thousands of hardworking individuals. The bankruptcy trustee, Irving Picard, is committed to recovering, via “Clawback”, the financial gain of many feeder firms for Madoff, as well as Madoff relatives, employees, his CPA and others who gained from this debacle.
Now the Justice Department, led by Attorney General Eric Holder, is increasing major efforts against “Insider Trading” abuses. Public company executives, hedge fund partners and managers are all subject to criminal investigations.
I ask where are the investigations and prosecution to those responsible for the financial crisis that caused the worst recession since the great depression?
What about those from Lehman, Bear Sterns, Merril Lynch, Citigroup, AIG or the many mortgage companies that participated and benefited from the Sub-Prime Meltdown? The settlement with Countrywide’s Angelo Mazilo was a joke in relation to how he personally benefited. And why, if the team is as high quality as professed, is it taking so long?
Why aren’t those executives that are responsible for the mess created being held accountable? Why are they embellishing the position that corporate crime pays?
Isn’t corporate fraud as serious a crime as theft or robbery of a store or a home or a business?
The financial crisis of the past few years needs to result in more prison terms, more very heavy fines, more accountability to restore the trust and confidence of the American public. Throwing the book at those responsible will further that vote of confidence in support of the SEC, FINRA and our Justice Department.
The Securities & Exchange Commission and the Financial Industry Regulatory Authority (FINRA) have imposed massive changes, licensing requirements and continuing education accountabilities on financial industry professionals.
What amazes me, though, is how little has been accomplished by the Justice Department in prosecuting those guilty of corporate abuses for personal gain since the debacles of Enron, Worldcom, Tyco and others of the early part of this decade. Only a select few have gone to prison.
Are today’s cases more complex than Enron or Worldcom or Tycos? And we were successful in convicting Enron’s Ken Lay, Chairman, Jeff Skilling, CEO and Andrew Fastow, CFO? We convicted Bernie Ebbers, CEO of Worldcom and Dennis Kozlowski, CEO of Tycos. All are serving prison terms, other than Mr. Lay whose premature death, before sentencing precluded the humiliation of prison.
And Bernie Madoff got his rightful fate, a 150 year sentence, after turning upside down the lives and financial stability of thousands of hardworking individuals. The bankruptcy trustee, Irving Picard, is committed to recovering, via “Clawback”, the financial gain of many feeder firms for Madoff, as well as Madoff relatives, employees, his CPA and others who gained from this debacle.
Now the Justice Department, led by Attorney General Eric Holder, is increasing major efforts against “Insider Trading” abuses. Public company executives, hedge fund partners and managers are all subject to criminal investigations.
I ask where are the investigations and prosecution to those responsible for the financial crisis that caused the worst recession since the great depression?
What about those from Lehman, Bear Sterns, Merril Lynch, Citigroup, AIG or the many mortgage companies that participated and benefited from the Sub-Prime Meltdown? The settlement with Countrywide’s Angelo Mazilo was a joke in relation to how he personally benefited. And why, if the team is as high quality as professed, is it taking so long?
Why aren’t those executives that are responsible for the mess created being held accountable? Why are they embellishing the position that corporate crime pays?
Isn’t corporate fraud as serious a crime as theft or robbery of a store or a home or a business?
The financial crisis of the past few years needs to result in more prison terms, more very heavy fines, more accountability to restore the trust and confidence of the American public. Throwing the book at those responsible will further that vote of confidence in support of the SEC, FINRA and our Justice Department.
Tuesday, June 1, 2010
Is Selling Your PR Firm an Eventual Goal? 10 Easy Tips to Sucessfully Prepare
By Rick Gould, CPA, JD
Every PR business is ultimately for sale. The fact that we are still in a downturn makes it even more challenging. Banks aren’t lending. There are multiples more sellers than buyers. Buyers that are active and manage to obtain credit are buying quality firms strategically- for specialty, for location, or for intellectual capital.
So what can you do NOW if selling your firm is even remotely an eventual goal? Follow these 10 tips and you will be able to successfully prepare end enter negotiations from a position of strength.
1. Start planning early.
Get outside counsel to learn the process and what you will ultimately need to do prior to discussions with a buyer.
2. Get your financials in order.
Be sure to use a reputable CPA firm and request they do a review report. This is short of an expensive audit but at a higher level than a basic compilation. Never believe you can ever substitute your business tax returns for a signed-off CPA report. A buyer will politely walk away.
3. Be realistic as to price expectations.
There are many perceived formulas circulating in the industry, but there are only a handful that are industry specific and acceptable. Get a professional valuation of your business.
4. Have a strong second tier of management.
This is critical in supporting value. If a firm is just an owner and a bunch of AE’s it substantially reduces value. Buyers always look beyond the top tier of management, beyond the CEO, beyond the principals.
5. Have systems in place.
Accounting, time management and workflow utilization systems are imperative for maximizing efficiency and profitability. They also adds “perception points.”
6. Expect an “earnout period”.
Be prepared to be paid out over 3-5 years based on agreed-to targets and goals. This earnout method is widely used and is equitable to both buyer and seller.
7. Have non-compete, non-solicitation agreements in place with key staff.
Include them in the sale- as you get a check they get a check. Thin is very incentivizing.
8. Have an integration plan.
Show how you would divide tasks post-sale, integrating your staff and those staff members and technologies of the buyer.
9. Be mindful of your lease.
Don’t renew your lease, or worst case renew it for a short-term. Try to go to month to month if your lease expires.
10. Write a business plan.
A business plan is a mission-critical, challenging project. You may need professional help preparing one. Show how you would use your staff and resources after the sale. It will always add “perception points” with a buyer. To do a thorough business plan you are required to think about the future. It makes you think about staffing, technology and the competition. It is a roadmap. It is truly an art to write a quality business plan. If you already have one for your firm, just a little updating will do the trick. Do so and watch a potential buyer light up and want to further discussions to buy your firm.
Every PR business is ultimately for sale. The fact that we are still in a downturn makes it even more challenging. Banks aren’t lending. There are multiples more sellers than buyers. Buyers that are active and manage to obtain credit are buying quality firms strategically- for specialty, for location, or for intellectual capital.
So what can you do NOW if selling your firm is even remotely an eventual goal? Follow these 10 tips and you will be able to successfully prepare end enter negotiations from a position of strength.
1. Start planning early.
Get outside counsel to learn the process and what you will ultimately need to do prior to discussions with a buyer.
2. Get your financials in order.
Be sure to use a reputable CPA firm and request they do a review report. This is short of an expensive audit but at a higher level than a basic compilation. Never believe you can ever substitute your business tax returns for a signed-off CPA report. A buyer will politely walk away.
3. Be realistic as to price expectations.
There are many perceived formulas circulating in the industry, but there are only a handful that are industry specific and acceptable. Get a professional valuation of your business.
4. Have a strong second tier of management.
This is critical in supporting value. If a firm is just an owner and a bunch of AE’s it substantially reduces value. Buyers always look beyond the top tier of management, beyond the CEO, beyond the principals.
5. Have systems in place.
Accounting, time management and workflow utilization systems are imperative for maximizing efficiency and profitability. They also adds “perception points.”
6. Expect an “earnout period”.
Be prepared to be paid out over 3-5 years based on agreed-to targets and goals. This earnout method is widely used and is equitable to both buyer and seller.
7. Have non-compete, non-solicitation agreements in place with key staff.
Include them in the sale- as you get a check they get a check. Thin is very incentivizing.
8. Have an integration plan.
Show how you would divide tasks post-sale, integrating your staff and those staff members and technologies of the buyer.
9. Be mindful of your lease.
Don’t renew your lease, or worst case renew it for a short-term. Try to go to month to month if your lease expires.
10. Write a business plan.
A business plan is a mission-critical, challenging project. You may need professional help preparing one. Show how you would use your staff and resources after the sale. It will always add “perception points” with a buyer. To do a thorough business plan you are required to think about the future. It makes you think about staffing, technology and the competition. It is a roadmap. It is truly an art to write a quality business plan. If you already have one for your firm, just a little updating will do the trick. Do so and watch a potential buyer light up and want to further discussions to buy your firm.
Wednesday, March 3, 2010
Growth Momentum, Circa 2010
By Rick Gould, CPA, JD
As we see the economic uncertainty of 2009 subside, we slowly exit the recession that has hammered the PR industry for the past 18 months. Now is the time to plan for a period of growth. Many firms saw their revenues cut in half over the last year, a painful and humbling experience.
Set targets, and set goals for growth in revenues today. Growth in revenues, if managed carefully, will beget growth to the bottom line. Looking at historical organic growth rates and projecting them out to the future should be a high priority.
Growth Momentum best describes this kind of economic recovery activity. This kind of thinking will positively drive your strategy. Is there a niche you would like to try (i.e. Healthcare, Crisis, Public Affairs etc)? The growth that most matters is the growth in the value of your firm. Just growing the top line will generally not increase value. Growing the bottom-line is the key to growing value.
Growth Momentum also has risk: the risk of growing in revenue size and staff with a negative effect on the bottom line. Economies of scale do not automatically occur unless this momentum is managed judiciously and effectively.
My blogs and messages keep coming back to our Annual Benchmarking Study. Industry benchmarks closely managed in relation to your actual stats provide the utmost critical tool to monitor and manage your Growth Momentum.
Most firms want to grow, but are unsure about how to best approach and manage the process. New challenges, new opportunities, and increased depth of services and staff are all contributing variables to growth. Growth can be a careful, measured approach or it can be a careless, emotionally driven one. Which approach do you think maximizes a firms’ value and price tag when the agency principal wants to monetize this valuable asset?
Larger firms that consistently surpass industry benchmarks possess the value and price-increasing intangibles in the valuation of their firm when they are in play to be sold. This will further drive growth momentum.
By adopting a culture of Growth Momentum and managing via benchmarking, firms will inherently evolve to keep staff motivated and attract new clients. Growing, successful firms that also exhibit top quality service and value are the ones that will survive the economic uncertainty.
Your starting point to launch this concept and to adopt a culture of Growth Momentum is to participate in our Best Practices Benchmarking Survey, being distributed on Monday, March 1. By doing so, you will be one of the first to receive the full survey report and findings once it is released. This report will outline the critical industry benchmarks you need to be following to maximize your economic recovery activities.
StevensGouldPincus 2010 Benchmarking Survey
As we see the economic uncertainty of 2009 subside, we slowly exit the recession that has hammered the PR industry for the past 18 months. Now is the time to plan for a period of growth. Many firms saw their revenues cut in half over the last year, a painful and humbling experience.
Set targets, and set goals for growth in revenues today. Growth in revenues, if managed carefully, will beget growth to the bottom line. Looking at historical organic growth rates and projecting them out to the future should be a high priority.
Growth Momentum best describes this kind of economic recovery activity. This kind of thinking will positively drive your strategy. Is there a niche you would like to try (i.e. Healthcare, Crisis, Public Affairs etc)? The growth that most matters is the growth in the value of your firm. Just growing the top line will generally not increase value. Growing the bottom-line is the key to growing value.
Growth Momentum also has risk: the risk of growing in revenue size and staff with a negative effect on the bottom line. Economies of scale do not automatically occur unless this momentum is managed judiciously and effectively.
My blogs and messages keep coming back to our Annual Benchmarking Study. Industry benchmarks closely managed in relation to your actual stats provide the utmost critical tool to monitor and manage your Growth Momentum.
Most firms want to grow, but are unsure about how to best approach and manage the process. New challenges, new opportunities, and increased depth of services and staff are all contributing variables to growth. Growth can be a careful, measured approach or it can be a careless, emotionally driven one. Which approach do you think maximizes a firms’ value and price tag when the agency principal wants to monetize this valuable asset?
Larger firms that consistently surpass industry benchmarks possess the value and price-increasing intangibles in the valuation of their firm when they are in play to be sold. This will further drive growth momentum.
By adopting a culture of Growth Momentum and managing via benchmarking, firms will inherently evolve to keep staff motivated and attract new clients. Growing, successful firms that also exhibit top quality service and value are the ones that will survive the economic uncertainty.
Your starting point to launch this concept and to adopt a culture of Growth Momentum is to participate in our Best Practices Benchmarking Survey, being distributed on Monday, March 1. By doing so, you will be one of the first to receive the full survey report and findings once it is released. This report will outline the critical industry benchmarks you need to be following to maximize your economic recovery activities.
StevensGouldPincus 2010 Benchmarking Survey
Monday, December 28, 2009
PR Agencies Gearing Up for a Robust 2010
By Rick Gould, CPA, JD
Our recent Economic Uncertainty Survey Report, to be released on January 11th, only confirmed what PR firm CEO’s predicted at the start of 2009: that it would be a challenging year, a year of client budget cuts, of staff layoffs, of decreased revenues and lower profit margins.
In February 2009, 65% of the 237 firms surveyed predicted major clients budget cuts, and now, the more results tabulated verify that prediction. 63.7% of the 157 firms responding showed a decrease in net revenues. My conclusion was that PR agency CEO’s are adept at predicting what lies in the future. 64% also predicted a substantial negative bottom line effect, which was also validated. The agency bottom line on an average, went from 19.2% to 11.6%; a 40% drop in profitability.
So it is with hope and confidence I predict that 2010 will be a year of rebuilding, rebounding and increased profitability. 64% of the firms currently surveyed believe revenues will increase in 2010. 22% are confident that they will remain the same. In these turbulent times “flat” is “up”.
Several of the CEO’s I interviewed added that their predictions were conservative. Many who checked off “no change” stated that they were reluctant to check “increase” in order to “play it safe”. Since when do PR CEO’s play it safe? Entrepreneurs are classic risk-takers and playing it safe was never their end game. This just goes to show the magnitude of the impact this years events have had on PR.
If firm CEO’s manage their firm using our historically validated benchmarks, hire and train quality staff, take on new clients selectively, and watch client profitability closely then the prediction of increased revenues and profitability for 2010 will be realized. I hope a year from now I will be reporting this reality to you.
Manage your firm as if you will be selling it tomorrow and you will soon see how 2010 has the potential for a banner year for your firm and the industry.
Happy Holidays and Happy New Year!!
P.S. also check out our current SGP Blog entry, “10 Predictions for 2010”.
stevensgouldpincusblog.blogspot.com
Our recent Economic Uncertainty Survey Report, to be released on January 11th, only confirmed what PR firm CEO’s predicted at the start of 2009: that it would be a challenging year, a year of client budget cuts, of staff layoffs, of decreased revenues and lower profit margins.
In February 2009, 65% of the 237 firms surveyed predicted major clients budget cuts, and now, the more results tabulated verify that prediction. 63.7% of the 157 firms responding showed a decrease in net revenues. My conclusion was that PR agency CEO’s are adept at predicting what lies in the future. 64% also predicted a substantial negative bottom line effect, which was also validated. The agency bottom line on an average, went from 19.2% to 11.6%; a 40% drop in profitability.
So it is with hope and confidence I predict that 2010 will be a year of rebuilding, rebounding and increased profitability. 64% of the firms currently surveyed believe revenues will increase in 2010. 22% are confident that they will remain the same. In these turbulent times “flat” is “up”.
Several of the CEO’s I interviewed added that their predictions were conservative. Many who checked off “no change” stated that they were reluctant to check “increase” in order to “play it safe”. Since when do PR CEO’s play it safe? Entrepreneurs are classic risk-takers and playing it safe was never their end game. This just goes to show the magnitude of the impact this years events have had on PR.
If firm CEO’s manage their firm using our historically validated benchmarks, hire and train quality staff, take on new clients selectively, and watch client profitability closely then the prediction of increased revenues and profitability for 2010 will be realized. I hope a year from now I will be reporting this reality to you.
Manage your firm as if you will be selling it tomorrow and you will soon see how 2010 has the potential for a banner year for your firm and the industry.
Happy Holidays and Happy New Year!!
P.S. also check out our current SGP Blog entry, “10 Predictions for 2010”.
stevensgouldpincusblog.blogspot.com
Wednesday, November 11, 2009
Post-Graduate Education Has Failed Wall Street
By Rick Gould, CPA, JD
Having weathered the rigors of graduate and law school, as well as teaching a graduate course in Entrepreneuring, I’ve noticed something is absent from the classroom environment. There is a critical piece missing from the overall education puzzle.
Many of today’s troubles on Wall Street stem from the lack of emphasis on sound business practices and ethics. Special focus on these critical areas is needed to develop a specific mindset. Education in the areas of developing strong ethics and pay-for-performance systems are the cornerstone for addressing this problem.
Incentivization programs are an important ingredient to the capitalistic system. But when executives become rich as their companies chalk up huge losses, then the stockholders are paying a hefty price and long-term share value and reputation are eroded. And this turns out to be a lose-lose for all stakeholders involved.
What is missing in most of today’s post-graduate MBA programs, Law School and Doctoral programs is analysis of executive compensation systems. This should be a required course early on in all programs, certainly at business schools and the required ethics course at law schools.
The concept of bonuses based on actual performance must be ingrained as the new cultural mindset going forward. Organizational structure, the role of the Board of Directors and how board members get compensated should all be scrutinized. Base pay, bonuses, stock options, expense allowances and perks should all have transparency and accountability.
Revamping corporate governance and compensation systems to be deeply rooted in ethics, to be specifically tied to actual performance, and to be transparent will go a long way toward preventing the degree of financial meltdown we have witnessed this past year.
What critical piece of the puzzle do you think is missing? How do you foster sound business practices and ethics in your firm?
Having weathered the rigors of graduate and law school, as well as teaching a graduate course in Entrepreneuring, I’ve noticed something is absent from the classroom environment. There is a critical piece missing from the overall education puzzle.
Many of today’s troubles on Wall Street stem from the lack of emphasis on sound business practices and ethics. Special focus on these critical areas is needed to develop a specific mindset. Education in the areas of developing strong ethics and pay-for-performance systems are the cornerstone for addressing this problem.
Incentivization programs are an important ingredient to the capitalistic system. But when executives become rich as their companies chalk up huge losses, then the stockholders are paying a hefty price and long-term share value and reputation are eroded. And this turns out to be a lose-lose for all stakeholders involved.
What is missing in most of today’s post-graduate MBA programs, Law School and Doctoral programs is analysis of executive compensation systems. This should be a required course early on in all programs, certainly at business schools and the required ethics course at law schools.
The concept of bonuses based on actual performance must be ingrained as the new cultural mindset going forward. Organizational structure, the role of the Board of Directors and how board members get compensated should all be scrutinized. Base pay, bonuses, stock options, expense allowances and perks should all have transparency and accountability.
Revamping corporate governance and compensation systems to be deeply rooted in ethics, to be specifically tied to actual performance, and to be transparent will go a long way toward preventing the degree of financial meltdown we have witnessed this past year.
What critical piece of the puzzle do you think is missing? How do you foster sound business practices and ethics in your firm?
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