Last week I had an enjoyable time at a breakfast discussion of my FT article on stock-based compensation. My dear friend at Spencer Stuart, Sharon Rudy, organized the panel discussion. The moderator was Chrytia Freeland, the US Managing Editor of the Financial Times (and brilliant Canadian originally from Alberta). I was the principal speaker and there were four panelist commentating on my talk – David O’Brien (current chair of RBC Financial and Encana and previous CEO of Encana), Tim Hockey (President of retail operations for TD Financial), Irv Becker (Hay Group) and David Beatty (my colleague at Rotman School and co-founder of the Canadinan Coalition for Good Governance).I laid out the argument from my FT article and mixed in some of the findings that I cover in my upcoming Harvard Business Review article (out in January 2010) on our current unhelpful obsession with shareholder value maximization and stock-based compensation. As I expected, the view that stock-based compensation is a great thing is so engrained that it is hard to get people to step back and question their untested assumptions.
David O’Brien was a perfect case in point. He encouraged the audience to ignore all the data that I presented (lieing with statistics in his view) and to believe him that stock-based compensation is terrific and necessary and just needs to be tweaked a bit. When I asked him to point to any data that has ever been produced which suggests that stock-based compensation has a positive impact on corporate performance, he insisted that it did have a positive impact because he knew it did. He didn’t need any studies or data.
This is why it is so very hard to change paradigms. We have had one paradigm slowly infiltrating our consciousness for 30 years and it is so intwined in our mental models, like a creeping vine, that it takes dedicated effort to root it out. When the Chair of Canada’s largest market capitalization company (and the world’s 54th) says that he doesn’t need any data to demonstrate success and believes that we should ignore any data that demonstrates failure, you know we have a problem.
But that is why the fight is worth fighting. If we could get rid of the completely counterproductive executive compensation practices that dominate the world of large companies, we could advance our economic performance dramatically, I believe.
A wonderfully pleasant experience for me at the panel was in listening to Tim Hockey from the TD. I had never heard Tim speak before. And in addition to having the best Canadian name imaginable, he was brilliant. He will be an excellent TD Financial CEO some day. Chrystia was a brilliant moderator as usual and I enjoyed the comments of Irv Becker who I met for the first time. David Beatty, the beloved Chair of my Dean’s Advisory Board at Rotman School, was his usual thoughtful self. I think that what David, Claude Lamoureux and Steve Jarislowsky created with the Canadian Coalition for Good Governance has changed Canadian governance for the better and will increasingly be seen as a model for countries elsewhere to adopt. Now I just have to get him to write the book about it!