I had the pleasure last week of recording a segment for WQXR.org’s Conducting Business program with host Jeff Spurgeon on the topic of executive compensation within the performing arts field. In addition to myself was Debra Oppenheim, the co-founder of Phillips Oppenheim, an executive search firm that specializes in arts institutions. It was a terrific discussion that didn’t shy away from a number of really tough issues related to this topic.
You can listen to the entire podcast via the player above or at the program’s webpage. But one item I’d like to expand on is toward the end of the conversation when Debra expresses her perception that executive compensation won’t be curtailed any time soon.
I wholeheartedly agree with that assessment. There are too many factors in motion to push back that trend anytime soon; even in the face of substantial economic pressures, executive compensation along with their traditional rate of increase is safe and sound.
But you should be careful not to let this topic become influenced by too much of a populist point of view. Sure, it can be unfair and unjustified but in short, an executive is worth pretty much whatever they want to be paid – and here’s the important part that is increasingly glossed over – but only if they produce results.
As is increasingly been the case, the trend in executive compensation is dominated by terms favorable to recipients without first demonstrating that value to the institution. To that end, if we want a system that doesn’t place artificial caps on compensation yet simultaneously ensures that we’re rewarding achievement over effort, here’s what needs to change throughout all levels of the business:
- Suspension on upfront payments, perks, etc. for incoming executives until they have adequately demonstrated competence and value; all of which has been validated by a quantifiable accountability process. Which leads right into the next point…
- Boards need to implement a rigorous and independently verified evaluation and review process. What that means is not using the executive search firm involved in securing the executive or any other source with similar conflicts of interest.
- Transparency on an executive’s contract terms. Yes, I know that one is going to rub most the wrong way but until we reach a point where altruistic behavior is no longer the exception to the rule, there’s nothing quite like a thousand shining eyes looking in to make sure those entrusted with running our institutions are doing the right thing.
Simply accepting that executive compensation increases and perks will continue to outpace other stakeholders by as much as three times as an unalterable matter of fact is not only irresponsible, but it will continue to prevent the field of arts management from reaching its true potential.
Worse still, the more the trend continues, the more attractive it becomes to executive frauds bent on taking advantage of a system that is already too easy to abuse. So in its own way, all of this conspires to retard growth and push out (or worse, corrupt) generations of promising executive talent.
So listen to the entire program and then leave a comment here AND at the WQXR page; it will demonstrate that this issue is worthy of attention and the national spotlight. In fact, I feel strongly enough on this topic and the need for readers to leave comments that if you only have time to leave a comment at one source, make it the WQXR page.