Should CEO Compensation Be Tied to Employee Satisfaction?

in Dean Freeman, Faculty, School
October 21st, 2011

CEO Compensation

In Harvard Business Review’s online series “The CEO’s Role in Fixing the System,” Kenneth Freeman, Allen Questrom Professor and Dean at Boston University School of Management, draws on his experience as chairman and CEO of Quest Diagnostics, where he led a significant and lasting turnaround.

He writes,

When I first became head of MetPath in 1995, a troubled Corning subsidiary that eventually became Quest Diagnostics, I dropped in on what was one of the largest clinical testing laboratories in the U.S. As I walked the halls, I found that almost no one would look me in the eye. Something was clearly wrong. When I tried to get to the bottom of it, HR not only couldn’t tell me the voluntary attrition rate, they couldn’t even give me an employee headcount.

The attrition rate turned out to be 45%….

As Raymond Gilmartin writes, people work not just for money but also for meaning in their lives. And, as many writers in this series argue, one of the chief means of fixing the system lies in focusing on the creation of long-term value. There is a simple but significant way to help achieve that goal: Evaluate and compensate CEOs, at least partly, on their ability to create a culture of aligned, engaged employees.

Read more and join the conversation at Harvard Business Review.