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Monday, April 04, 2011

Rewards for Failure? | A NOTE FROM THE FOUNDER

Rewards for Failure?

by Adam J. Kovitz

Rewards for failure is something that no rationally-minded entrepreneurial CEO or small business owner would stand for in any of their employees.  Rationally-minded investors or board members of such organizations wouldn't stand for rewarding their CEOs either.  When bad behavior happens, most rationally-minded individuals take appropriate action.

So why is it then that Transocean Ltd's (one of the companies behind last year's Gulf of Mexico oil spill, along with BP, Halliburton and Cameron International Corporation) Board of Directors is rewarding their executives with bonuses, pay raises and stock options?

The answer is one of the following:
a.)  Transocean's Board of Directors are not in their right minds, are incapable of making rational decisions and therefore, should be let go
b.)  Transocean's Board of Directors are devoid of conscience, care little for the lives suffered at the hands of their company and therefore, should be let go, or
c.)  From a recent SEC filing:  "Notwithstanding the tragic loss of life in the Gulf of Mexico, we achieved an exemplary statistical safety record as measured by our total recordable incident rate and total potential severity rate.  As measured by these standards, we recorded the best year in safety performance in our company's history, which is a reflection on our commitment to achieving an incident-free environment, all the time, everywhere."

This was a trick question:  the answer was d.) all of the above.

Instead of firing Transamerica CEO, Steven L. Newman and his executive cronies by patting themselves on the back that they didn't kill any more than they already have, and they are receiving the following:
1.)   an average 3.8 percent pay raise (not Mr. Newman, but the rest of the execs)
2.)  performance bonuses of 44.8 percent, and
3.)  $1.2 million to $5.4 million in stock options.


Would You Bank with Chase?

Let's stop rewarding bad behavior.  Smaller companies can't afford to be so brazen...why should big business be any different?  Let's hold big business accountable to the same standards as the rest of us.  Furthermore, I propose the following:
1.)  Urge your local government representatives to promote legislation that supports executive salary caps - there is such a thing (I know it's sacrilegious for an entrepreneur to say) as too much.  If they don't, vote them out.
2.)  Limit your exposure to dealing with such companies that engage in questionable practices, and work collaboratively with fellow entrepreneurs and small businesses wherever possible.
3.)  Lend a sympathetic ear (as time permits) to your fellow entrepreneurs and business owners.  Extend them credit and price-breaks wherever possible, and
4.)  Be an example of ethical and sustainable business practices.

If more entrepreneurs and small businesses implement any or all of the previously-stated suggestions, we can still spur on a new economic revolution that will be beneficial to all in the long term.  If we don't, our future may continue to look like this...

Q:  Steven L. Newman, CEO of Transamerica Ltd...your company was one of four responsible for killing eleven (nine of them, your own employees), wounding seventeen others, releasing over 205 million gallons of oil into the Gulf of Mexico, causing a federal fisheries disaster in Alabama, Mississippi and Louisiana costing more than $2.5 billion in damages, killing countless wildlife and putting tens of thousands of small business owners out of business...what are you going to going to do now?

A:  I'm going to Disneyworld!

All my best,


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The Emergence of The Relationship Economy

The Emergence of The Relationship Economy
The Emergence of the Relationship Economy features TNNWC Founder, Adam J. Kovitz as a contributing author and contains some of his early work on The Laws of Relationship Capital. The book is available in hardcopy and e-book formats. With a forward written by Doc Searls (of Cluetrain Manifesto fame), it is considered a "must read" for anyone responsible for the strategic direction of their business. If you would like to purchase your own copy, please click the image above.


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