Thursday, July 24, 2008

Advice Worth Millions

Why do I not believe that executives are worth the insanely large salaries they currently receive and people like Phil Gramm say they deserve? The New York Times has a story today about Ford's decision to move its production towards small cars. In the story, Ford's CEO, Alan Mulally, is described as a bold risk-taker and innovator. Large investor Kirk Kerkorian has bought of Ford shares because he believes in Mulally.

What kind of business wizardry makes this CEO so valuable?

“Everybody says cut and cut some more, but how are we going to sustain this company?” Mr. Mulally said in one meeting in his office on the 12th floor of Ford headquarters, according to people in attendance. “What does a sustainable Ford look like, gentlemen?”

...“Why are we in business?” he repeatedly asked the group. “We are in business to create value. And we can’t create value if we go out of business.”
If only every CEO had such insight! And this isn't all of his wisdom:

“Let’s see, the global share of large vehicles is 15 percent,” he said at one such meeting, according to people in attendance. “And you’re telling me you want to invest more in them?”

He often exhorts his employees to “take a point of view of the future,” and then devise a plan supporting it.

This is not meant to be a slam at Mr. Mulally. Those statements sound like perfectly good sense. What should frighten us is that these ideas were apparently novel to the rest of the management team.

If the common sense statements of Mulally constitute the pinnacle of business leadership, then we must conclude two things. One is that people who see this as some great talent maybe shouldn't be allowed to have shoelaces. The other is that if general commonsense is the bar for exorbitant pay, then the very idea of business itself is in serious trouble.

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