Peter Block On Corrupt Compensation

Posted by on Jan 28, 2011 in Leadership, Legacy, Life | 6 Comments

compensation

This is a quote from People Matters by Peter Block — one of my favorite thinkers on how to create more meaningful work. It starts focused on HR, but quickly blossoms into a vision for reinventing the whole corporate structure for the good of… well, everyone.

Wow, I love this.

HR is a player in the question of corporate and societal ethics. Most unethical or corrupt behavior starts from the HR/Management philosophy of compensation and rewards; they think that money motivates people and they also believe that variable pay is the way to motivate performance. The extreme version of this is including stock options as a serious component of executive pay. This philosophy creates a context of excessive short-term orientation where unethical behavior is more likely. If companies link payment to stock prices, they are creating a false god. Then CEO will not be incentivized to invest in the long-run, they will be incentivized to cut costs, maximize short-term profits, and postpone development.

What is interesting about this compensation philosophy, especially at the executive level, is that companies are not rewarding for commitment and long-term alignment of these managers but actually creating conditions to encash compensation and leave the organization.

It is not only a question of compensation and motivation philosophy, it is a question of purpose. Leadership needs to look at their business with a larger purpose than shareholder value. Leaders focusing on just making money will not build companies or the country. Asking oneself what is the larger purpose of the organization is the ethical question that managers should pose to themselves. Pay fair salaries to avoid bribing, make salaries transparent and even publish them to avoid excessive focus on compensation. The systems already exist to prevent unethical behavior, more checks and balances will not help. When controls do not work, adding more is madness. What is needed is more internal and external transparency. Whistleblowers also will not lead to systemic change, because the case just appears to be an exception. Board of Directors again cannot help as most of the times they do not know enough details to find questionable practices until something blows up. It is the coming together of corporate leadership, business schools, citizen groups and government to call for a shift in pay practices and purpose. The purpose of companies should be for the common good.

This is possible because it is in human nature to do the right thing. I believe that given a choice, most people will choose a larger purpose. Unfortunately, our western economic system is based on the assumption that men are driven by self-interest and the most valuable things are those that are scarce. This is not true, it is just popular. We need to break this assumption. We are cast under the spell of conservative, last century economic thinking. Luckily, that is not working well in the west.

It is not correct that the entire universe around the individual today is going wrong; what is going wrong is the narrative; we need to change the conversation to change the reality. As long as we continue the problem narrative that people are selfish, government and leaders are corrupt, more control is needed, and the west is the model for our future, nothing will change. The new narrative is about abundance, those who act on higher purpose, and the possibility of the common. It is close at hand, we just do not think it is news.

(Emphasis added by me.)

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If you liked that post, then try these…

Future-Proofing Your Company on Under30CEO by Josh Allan Dykstra on January 13th, 2013

Glimpses Of Brilliance: IKEA by Josh Allan Dykstra on August 23rd, 2010

A Talent Imbalance by Josh Allan Dykstra on July 17th, 2011

6 Comments

  1. benjamin
    January 30, 2011

    interesting article. have you ever read dorothy sayers’ “why work”? i think you’d find it fascinating. she talks about the view of work as a whole (a view which i wholeheartedly agree with). there are some similarities between her essay and this article. check it out and let me know what you think: http://bit.ly/efwOjf

    Reply
  2. Josh Allan Dykstra
    January 30, 2011

    What a great essay. Thank you for turning me on to it, Ben!

    The whole article is so incredibly prescient; it’s hard to believe she published it almost 70 years ago! (In much of it, we could just replace “war” with “recession” and it could have been written yesterday.) Clearly, and sadly, her words of warning were not heeded back then.

    Here are my seven favorite quotes:

    “A society in which consumption has to be artificially stimulated in order to keep production going is a society founded on trash and waste, and such a society is a house built upon sand.”

    “We have had to learn the bitter lesson that in all the world there are only two sources of real wealth: the fruit of the earth and the labor of men; and to estimate work not by the money it brings to the producer, but by the worth of the thing that is made.”

    “We could—you and I—bring the whole fantastic economy of profitable waste down to the ground overnight, without legislation and without revolution, merely by refusing to cooperate with it.”

    “The habit of thinking about work as something one does to make money is so ingrained in us that we can scarcely imagine what a revolutionary change it would be to think about it instead in terms of the work done.”

    “…The right men and women are still persistently thrust into the wrong jobs, through sheer inability on everybody’s part to imaging a purely vocational approach to the business of fitting together the worker and his work.” (A terrific bit of early strengths-based business thinking here!)

    “[If we] arranged our work and our standard of values accordingly, we should no longer think of work as something that we hastened to get through in order to enjoy our leisure; we should look on our leisure as the period of changed rhythm that refreshed us for the delightful purpose of getting on with our work.”

    “The greatest insult which a commercial age has offered to the worker has been to rob him of all interest in the end product of the work and to force him to dedicate his life to making badly things which were not worth making.”

    Reply
  3. benjamin
    January 30, 2011

    thought you’d like it. ;) it really is an amazing presentation of what work is meant to be and one that, i believe, is a real outworking of the gospel in our work. one of my favorite phrases in it is:

    “The Church’s approach to an intelligent carpenter is usually confined to exhorting him not to be drunk and disorderly in his leisure hours, and to come to church on Sundays. What the Church should be telling him is this: that the very first demand that his religion makes upon him is that he should make good tables.”

    then again, since i’m in the role of “the church”, it’s specifically something applicable to me. the whole essay is amazing and it’s hard to even pick a favorite part.

    if you have a lot more time to read, i just began picking through a book of hers called “the mind of the Maker”. it’s available free online here: http://bit.ly/f8Ijs0 basically she looks at the creative process and innovation in light of the Trinity.

    as long as i’m dropping great suggestions your direction, have you heard of tim keller? he wrote the NYT bestseller “the reason for God”. his messages on work really echo sayers a lot and, in my opinion, add even another layer of depth. if you’re interested, check it out here: http://bit.ly/eOMTBt

    Reply
  4. Josh Allan Dykstra
    February 3, 2011

    It’s fascinating to me that you read Dorothy’s article from a spiritual perspective and find it all applicable — I am reading it almost entirely from a business perspective and I feel the same way.

    That’s just good (and well-written) philosophy.

    I am loving Tim’s message. Thank you for sharing that, too!

    I’m really getting a feeling that this is a big part of my life purpose: to help (however I can) push the idea of “meaningful work” back into American business. These ideas resonate so strongly with me.

    Reply
  5. benjamin
    February 4, 2011

    sayers’ essay is definitely well written and well thought out. one of the critiques in it is that the church has been mistaken in separating work from the sacred. the message of the gospel is that God is glorified in all of life, in creative and meaningful business just as in taking part in a worship service at a church. i suppose you might call it a holistic view of spirituality and daily living.

    keller is by far my favorite teacher at the moment. i think meaningful work, not for money, but for the beauty of the thing made, from a sense of calling rather than subsisting if you will, is definitely something that’s needed in society, as sayers so eloquently put it in the essay. i highly recommend searching around the site of keller’s teachings. specifically as concerns your passion for meaningful work, one i think you might be particularly interested in is “christianity and the creative age” (under the “mission” category on the side menu at that same link) but really all of them are amazing so check out as many as you are inclined to.

    Reply
  6. Josh Allan Dykstra
    February 4, 2011

    I will check that one out, too!

    Thanks again, Ben. This is really great stuff.

    Reply

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