Posts Tagged ‘management’

Who says CEOs are overpaid?

February 10, 2010

There has been much ink spilled in the hysteria about the level of executive compensation in Australia and elsewhere.  Some vitriol has been justified in instances of overt incompetence or malfeasance, but arguments for legislative constraints on payment levels seem simply bizarre to me.

There has been a fascinating insight into the perceived value of one Aussie CEO in the past few days.  Music and electronics retailer JB Hi-Fi announced long-served CEO Richard Uechtritz would be stepping down. Despite also announcing increased revenue, profits etc., the company’s market capitalisation dropped approximately $111m in the following hours.

Now, Uechtritz was on a salary of less than $1m a year (plus some pretty tasty share options – the firm has risen from $2 to a high of over $22 in 8 years). Even if half the share price fall could be attributed to some disappointment at the firm not exceeding profit expectations and the overall gloom within the retail sector, it would still put a market valuation of around $50m on his head. 

Surely, he should have been receiving well in excess of his typical remuneration given the markets’ valuation of his impact?

Note: The author (happily) owns shares in said company.

Advertisement

Might multinational managers be the problem?

July 15, 2009

My recent US trip was principally motivated the big annual conference of international business scholars – the AIB. I spent five sunny days in San Diego presented, discussing and pondering the nature of multinational activities, strategies and impact with 900 or so other academics. There were a range of fascinating sessions and papers.

An opening session featured some IB luminaries – Pankaj Ghemawat and Udo Zander – discussing the nature of the global business environment (notionally the rather non-controversial Flat versus Spikey debate). Both made strong arguments that none of the purported globalisation we’ve seen in recent decades is particularly unprecedented when we look at a time frame of a century or more, nor is international trade and production as integrated or connected as most people assume. They presented some conflicting implications of this however.

Ghemawat argued that firms run the risk of assuming the world is flat and thus adopting big, bland reductionist strategies that will satisfy no consumer’s needs and will stumble in the face of genuine country and regional differences.

Zander argued a more complex and controversial position. In his tale, only a small number of multinationals manage to build temporary innovation and knowledge advantages that they can leverage via global cloning (i.e. advantages that are sufficiently transferable and applicable across multiple markets). Other multinationals will struggle to adapt to to local needs and thus fail (or at least underperform).

the dunceSo far, there’s not much new in this perspective. Even his explanation for the barriers to firm adaptation/learning aren’t surprising – the multinationals are burdened by the organisational history/institutional memory and current wisdom is sticky.

Where it gets intriguing is the examples he gave of subsidiary managers in markets steadfastly refusing to change their strategy in the face of years of failure and repeated suggestions to adapt and learn.

This begs the question, as does Ghemawat’s characterisation of strategies being too simple, are multinational managers the handbrake on multinational success?

Perhaps we have placed too much weight on the size of the challenges in international business, and too little on the failure of managers to tackle these challenges. Firms may be failing more because of the weaknesses of their managers rather than any insurmountable liabilities of foreignness or risks of doing international business.

As scholars we spend too little time looking at failures and too much time looking at the winners. Perhaps the winners are just those who stuffed it up the least. Might we learn more from the mistakes?