Better Capitalism in Action - Arne Sorenson and Eric Yuan
Search for the phrase "qualities of a good business leader," and you will get many lists of varying lengths in response. Among these traits, things like communication skills, knowledge, enthusiasm, and vision will inevitably pop up; these are all traits we expect to see in the typical CEO. Far more surprising are the number of lists that include attributes such as respect, gratitude, humility, and self-awareness. Not, perhaps, characteristics that critics of capitalism may think of as being part of the company leader's personality profile.
Another trait that makes many of these lists is empathy, or the ability to understand and share the feelings of others. At the mention of this quality, many of us may scratch our heads and wonder how empathy can coexist with making hard business decisions such as initiating pay cuts or laying off employees. Are we simply talking about the boss feeling bad when she has to let go of part of the company's workforce? Or does true empathy manifest itself in other ways as well? Going through the recent trauma of COVID-19 and enduring the current test of high inflation has given us some examples of how true empathy in a leader might manifests itself.
During the COVID-19 crises, when the world stayed home while the virus raged and nothing about work was normal, many companies scrambled to adjust to a temporary but definitively lower demand for goods and services. Among the sectors that were hardest hit, the leisure and hospitality industries were standouts, cutting a staggering 49% of jobs within the first 45 days of the pandemic shutdown.
Arne Sorenson | Image Credit: Marriott International
In response to the situation, the CEOs of Hilton and Marriott (Chris Nassetta and Arne Sorenson, respectively) declined their entire salary for the rest of the year. Arne Sorenson also asked his senior executives to take a 50% pay cut as well. His voice quavering slightly, Sorenson delivered a video message to his employees that included this statement: “I can tell you that I have never had a more difficult moment than this one. There is simply nothing worse than telling highly valued associates...that their roles are being impacted by events completely outside of their control.” Watching the video, you have no doubt that Mr. Sorenson meant what he said; but his action of foregoing his own salary spoke louder than any words. (Sadly, Mr. Sorenson died in 2021 from pancreatic cancer, but his shining ethics and example live on.)
Reactions to the video included these comments: "I wish more leaders in every part of society showed as much compassion as Arne did," and "Marriott CEO...Announces he is taking no salary and cutting exec pay by 50%. Expresses vulnerability and genuine care for every employee and their mission. Who wouldn’t run through a wall for this guy?" Who indeed? As Jason Aten, a columnist for Inc. expressed it, "The video is worth a watch for every leader. And not just because in it, he commits to forgoing a salary for the remainder of the year.... That, by the way, is a lesson in leadership in and of itself."
Eric Yuan | Image Credit: Reuters
During the current economic challenge of high inflation, a number of business leaders--such as Sundar Pichai of Alphabet, Tim Cook of Apple, and Jamie Dimon of JPMorgan--have taken pay cuts, in part because they express a desire not to lay off employees. A standout example among these leaders, though, is Eric Yuan, founder of Zoom, who is among the 5% of CEOs who are currently taking over a 90% pay cut this year. Yuan has reduced his annual salary by 98% and refused his 2023 bonus. Like Sorenson, he has asked his executives to take a substantial pay cut and forego their bonuses as well. He has also offered affected employees up to 16 weeks salary, their 2023 earned bonus, stock option vesting, outplacement services, and paid health insurance.
It is important to note that not all pay cuts are equal. While cutting a salary can be significant, this part of a CEO's compensation my be dwarfed by stock options and bonuses. Cutting an exec's salary while laying off employees, if that layoff results in increasing that person's stock option value, is not a true sacrifice. If leaders want their gestures to be more than symbolic, they must address their overall compensation package, as Yuan has done, and they must do it for a length of time that will truly make a difference.
Again, it is one thing for a leaders to empathize with words, like Yuan's February email to his employees. It is quite another thing for him to feel the pain along with them. The heart of Better Capitalism is just that: heart; and the empathy Sorenson and Yuan have shown is the real world manifestation of that quality. It is a lesson that hopefully more business leaders will learn, now and in the future, as we move forward together toward a more mutually beneficial world.
We invite you to join us in our efforts to share in stories of leaders who are having a positive impact by applying Partnership Economics ethics in their spheres of influence to create better capitalism. If you have an example of a business leader you would like us to write about, please email us at info@PartnershipEconomics.com. We would love to share the story.
What about you? Share your story, question, comment, idea, disagreement -- yes, we welcome disagreement for the sake of mutual benefit! -- with us at blog@PartnershipEconomics.com. We will give a thoughtful response.
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