Harvard Business Online

Should Your CEO Take a Pay Cut?


Posted on Practically Radical: March 16, 2009 12:21 PM

My friends at the Washington Post, where I am a member of the "On Leadership" panel, asked me to consider a sports-related question which is really a leadership-related question: In this period of March Madness, should big-time college coaches take pay cuts to respond to the tough times?

You can find my full essay here. But what follows captures the essence of my argument.

Consider these two scenes for a revealing look at the face of leadership in difficult times—and a surprising twist on how we read those faces.

Back on February 21, after his team beat the visitors from the University of South Florida, University of Connecticut men's basketball coach Jim Calhoun fielded a press-conference question from a gadlfly blogger. Given the state's economic crisis, this blogger asked, would Calhoun, as the state's top-paid employee, consider returning some of his $1.6 million salary? "Not one dime," Calhoun shot back. "I'd like to be able to retire some day." When the blogger followed up, Calhoun heated up, "What was the take tonight? You're not really that stupid are you? My best advice to you—shut up."

Meanwhile, last week, a Boston Globe columnist wrote about Paul Levy, CEO of Beth Israel Deaconess Medical Center, a legendary hospital in a city filled with them. Levy had convened a gathering of employees and executives of the 8,000-employee hospital, to discuss how the organization would respond to the economic crisis. In the days prior to the meeting, the columnist noted, Levy had been walking the halls of the hospital, examining the details of how the place worked—especially how the often-overlooked frontline employees did their jobs. He was impressed by what he saw, and decided to recognize their commitment.

"I want to run an idea by you that I think is important, and I'd like to get your reaction to it," Levy told the assembly. "I'd like to do what we can do to protect the lower-wage earners—the transporters, the housekeepers, the food-service people...If we protect these workers, it means the rest of us will have to make a bigger sacrifice. It means that others will have to give up more of their salary or benefits."

Now, I wish I could report that Calhoun's rant was met by a wave of disgust and revulsion, while Levy's gesture was met by acclaim and celebration, but the world's more complicated than that. The latter certainly was the case. Levy's proposal received "thunderous" applause at the assembly, according to the Globe, and it touched off wave of email brainstorming about how to save money while protecting the lowest-paid employees. The CEO's challenge to his colleagues became a feel-good episode for the whole city.

As for Calhoun, well, the people of Connecticut spoke loud and clear—in feeling good about their coach. A Quinnipiac University poll showed that 61 percent of respondents thought that Calhoun should keep his full salary, while only 30 percent thought he should give back a portion of it. Even more strikingly, 51 percent approved of his press-conference rant, and even those who disapproved did not think he should be disciplined by the Governor, who said that she found his behavior "embarrassing."

So how do I make sense of these two contrasting leadership moments? The bottom line is that the idea of leaders taking a pay cut in difficult times really isn't about money, it's about mindset—modeling the values and behavior that you'd like to see in the rest of the organization.

At a place like Beth Israel, the values are about healing, compassion, and empathy. So it's no wonder Levy's call for sacrifice met with approval. In big-time college sports, the values are about winning at all costs. After all, the players themselves receive no salary for their hard work, no matter how big "the take" at their games every night. But don't feel sorry for them—their goal is to cash in with NBA contracts that make Jim Calhoun's salary look like lunch money. As for Calhoun's "customers," the citizens of Connecticut? Well, they have overlooked many expletive-filled tirades in the past by Calhoun, who seems to be as execrable a person as he is effective a coach. According to the Quinnipiac poll, Calhoun has a 68 percent favorable rating in the state and an 86 percent favorable rating among basketball fans.

In other words, we get the leaders we ask for. I'm sure the 8,000 employees of Beth Israel Deaconess Medical Center are proud to have a CEO whose leadership values reflect the mission of their hospital. And I guess the people of Connecticut are proud to have a basketball coach who gets fightin' mad when questioned about his $1.6 million salary—so long as that coach delivers plenty of wins during March Madness.

Provided by Harvard Business—Where Leaders Get Their Edge

William C. Taylor is an agenda-setting thinker, writer, and entrepreneur. His new book, Mavericks at Work, has been a New York Times and Wall Street Journal Bestseller. As cofounder of Fast Company, he launched a magazine that earned a passionate following among executives and entrepreneurs. He is an adjunct professor at Babson College and a former associate editor of Harvard Business Review.

Later, Baby
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