A Business Where The Bosses Took The Pay Cut

Why doesn't this happen more often you ask? IMHO, first leadership is frequently absent. I think in this case it was clear people responded to the CEO's leadership - not just words, but actions. The US military isn't perfect, but I think they lead by example more than corporations do. Second, IMHO, perhaps that hospital has created a tighter bond and fostered improved teamwork.

Greed.

Why doesn't it happen more often? Because CEOs would rather lay off people than give up their private jet. Ask Rick Wagoner and the other auto company heads why they were still flying private jets when they came for a handout from taxpayers. If it weren't for the PR nightmare, they would still be flying private jets. It takes a wise, caring CEO to just get it.

“Why doesn’t this happen more often in America?” It doesn't happen more often because most people tend to be self centered as well as over-valuing themselves immensely. When we heard of layoffs at Anthem I offered up some of these suggestions but they fell on deaf ears and uncaring hearts. Instead of saving jobs we spent 2 months rebuilding a fancier break room and a rather sweet gym downstairs. The real question is why do people act like they are entitled to all of these perks?

Why doesn't this happen more often?
GREED.

Why does it not happen more? Because I think many CEOs do not look at it that way. They do not see, nor care, about the lower paid employees because they are deemed easily replaceable and therefore expendable. Greed, lack of ideas for such a crisis are also a big reason why.

I applaud this effort and hope many companies follow suit.

I agree with Matt! It's all about leadership walking the talk! Too bad most corporations and financial institutions from Enron on didn't think twice about their employees or others. Our economy might not be in as big a mess as it is!

Paul Levy - got to remember his name. I do believe he is one of 3 GOOD PEOPLE that I know about.

Maybe BusinessWeek can do humanity a favor and compile a list of GOOD PEOPLE. It may even set an example.

Easy, because everyone is looking out for good old number 1 even at the demise of the rest of the population. The good ol' saying, "What's in it for me?" is the motto of just about anyone you come across these days - let's face it. Its not just the CEOs, its your average everyday Joe looking to get himself ahead and completely disregarding all others (speaking in general terms, of course). It's a cultural thing more than a corporate thing by account of my dealing with average people everyday.

It is appalling when management receives bonuses and raises while the staff receive layoffs and pay cuts. As CEO of a small firm (65), I reduced my salary by 50% last August to avoid laying off staff. In September, our staff responded by requesting pay cuts of 10% to 25% in order not to lay off staff. The pay cuts are difficult financially but we feel that we are helping each other. I seriously don't understand the logic behind anyone including CEO's receiving bonuses when the company is performing poorly. Isn't that Business 101?

After several years in Technology companies after a PhD in Physics I came to the conclusion that the management I encountered in academia and industry were selfish, bigoted, misanthropic idiots. As DanTe says I will also remember Paul Levy's name for a long time to come. He is the exception, NOT the rule. One has to remember that the individuals who ran/run companies such as Enron and Exxon to GM and GE are there simply to show that they can declare a profit at all costs, typically at the expense of their employees and the paying public.

I applaud the action, but am not all that impressed at the sacrifice ... the amount the CEO gave up is almost exactly my total yearly earnings ... if he had gone down to, say, 2 or 3 times my wages (70% to 80% cut), I'd be much more impressed.

I have been laid off a couple of times. Most recently when I was working for a financial services company.

To me the answer is pretty straightforward. Greed. Bosses want every one of their million dollars while not sacrificing some amounts for their staff. They don't really care about the cogs that do some of the real work.

Enlightened companies are few and far between. And they get branded with the tar brush of socialism.

These days, that appears to be a four letter word.

Thanks to Cathy for highlighting Paul Levy and Beth Israel.

Answering the rhetorical question about WHY is rather obvious, isn't it?

As Oliver Stoned satirized in "Wall Street" in 1988..."Greed is good."

(And greed is propagandized as good in the media, if nobody has noticed by now. It only matters that you're a zillionaire...no one asks, "But did you get successful destroying lives and communities or corrupting public officials with jet-setting "fund raisers" or inserting corporate welfare bailout/handout legislation?" so your otherwise profitable industry makes even MORE monopoly profits, etc, etc...)

BusinessWeek has always shined at pointing out the dichotomy of Big Business. Unfortunately, everyone's not reading BW yet...and the backsliding on anti-trust, money laundering, plainly immoral tax avoidance and other corporate malfeasance continues.

Final point: as we get another round of hysterical, kindergarten coverage about the new Supreme Court Justice nominee, ever notice the minimal attention paid to the BUSINESS-RELATED court decisions nominees have handed down...? The Supreme Court is hugely pro-corporation, anti-everything else if you look at the record...in case you're wondering.

Try watching the riveting documentary, "The Corporation" and then see how you perceive business news...

A true leader knows that 'Leadership by Example' is a cornerstone of success. In order to have responsibility, one must allow others to exercise it. In order to be a leader, one must allow others to demonstrate their leadership abilities as well. True leadership is difficult to find because ... many are too busy trying to convince and prove to others, they 'have it' ... as opposed to actually exercising it!

Most economists will say that an across-the-board pay cut is bad for two reasons:

1. It destroys the buying power of those employed thereby artificially inflating the cost of goods and services and debt. (If you have less to spend, everything becomes proportionately more expensive, right?) Therefore, there will be even more downward pressure on the economy as people continue to cut back with even less to spend! Makes sense.

2. It doesn't force businesses to become more efficient and competitive which is exactly what they need to do in order to get the economy rolling again.

Please don't talk about talk about private jets and big shots abusing their position. I work in corporate aviation and in my company everyone took pay cuts, 401K reductions, reduced work weeks and we still lost 20% of our workforce. First off there are no private jets except for movie stars or sports personalities. The planes are corporate jets and they are used by the entire company. These jets allow companies to compete in a global market. If we keep implying corporate jets are excessive, we will lose market and the economy will shrink even more. We need to work with the tools we have and do the best we can. The scapegoat is not the solution.

I believe Paul Levy has the right thinking cap on. However Mr. Levy is just one individual among the thousands of "leaders" whose primary goals are to maximize the wealth of, not the shareholders, but of themselves. We are unfortunate to be part of an unethical corporate society which lacks the sufficient knowledge of business ethics 101. Enron and Exxon prove the world, not only those who work for them, that unless everyone realizes the principle goal highlighting the company... tragedy will hit and will destroy. And please don't be fooled that size can change that...because as we can clearly see GM is under the sea for now. It is both the responsibility of the CEOs and those under him to help the company move forward. In the case of Paul Levy, everyone pitched in to help save their fellow colleagues from facing Trump's famous line "You're fired." I both admire and congratulate Mr. Levy for his effective method and his determination and sacrifice to his employees in saving their jobs. More of him are needed!

Maybe it is time to watch the Amish. They seem to have the right idea.

to Samon: Nice strawman argument. Which economists? Not all are created equal. Additionally, the idea that simply by cutting out the bad will instantly put growth back on is very misguided. Regardless if you still have your job, if everyone else around you is going down, you are going to be careful with the money you spend and not make casual purchases - see the savings rate that is now at 6%+.

Until the govt can make people think there will be sustained inflation, people will save - and that is why we are really screwed. To credibly make people believe inflation will occur for some time to come so they become spenders again will require a lot of inflation up front and kill anyone that hasn't positioned themselves accordingly.

A little time with history would serve you well. We are in a debt destruction cycle and it will continue for at least a few more years. Until that is done, forget about the economy going anywhere. At best we are Japan with their lost decade(s).

I'd also say get ready for stagflation again with the amount of money being printed and the debt that is being monetized.

During the Depression the management at HP did the same thing. They declared an across the board 10% paycut in everyone's salary so that no one will be fired. The point is, it depends on management, the people calling the shots, and what they value... but ultimately it depends on our culture as Americans, are we out for ourselves or will we acknowledge that we are a a society? People who depend on others on all strata, management/workers; consumers/producers; VIPs/humans... I agree, the media should report more cases of pulling together than tearing apart (and people should care more about stories of the former than the latter.)

Jimh: Paul Krugman and others. I apologize that my memory isn't was it once was.

The idea is not that cutting out the bad simply starts the economy again. Cutting out the bad and realizing efficiencies can promote innovation which this country is sorely in need of in order to compete.

A little time with history would do you well too. Real wages have not grown when adjusted for inflation in nearly forty years!

Why doesn't this happen more often? Fearful and unimaginative leaders who don't lead by example. My daughter works at Mr. Levy's hospital. She says he's the real deal, a real "man of the people." I think she's lucky to experience such leadership so early in her career. The rest of us ... still waiting :>)