The CEO Pay Gap Widens

If you are a CEO at a small to middle-sized firm you probably got a puny 2 percent pay raise last year. Yet if you were a big shot at a Standard & Poors 500 firm, you fared a heck of a lot better.

Indeed, while CEO pay slowed down a bit last year, the range widened considerably involving compensation at large corporations and smaller ones, according to a preliminary survey at The Corporate Library which is available for a fee.

The survey showed pay hikes at S&P 500 companies of more than 15 percent last year. The largest single increase was 1,400 percent and went to Nabeel Gareeb, CEO of MEMC Electronic Materials who pulled in $79.5 million, much of it from profits on stock options.

Big discretionary bonuses of $30 million went to Lloyd Blankfein followed by heads of Wachovia, Bank of New York Mellon Corp. and Prudential Financial.

The slowdown in pay seems to be good news, except that it doesn’t apply to the Big Boys where most of the excess has always been. What’s your take?

What To Do When a Crisis Hits

Crisis communications experts like to say that every organization is going to have a crisis sooner or later, and that in fact, the underlying reasons for your crisis are probably already festering in your organization.

Larry Smith, president of the Institute for Crisis Management, likes to point to the story of the Firestone tires that started failing on Ford Explorers in the 1990s. The first reports of these problems came to light in 1993, but it wasn’t until 2000 that the story “blew up” into a crisis — in other words, Ford and Firestone had seven years to avoid a crisis, but due to inaction, they didn’t.

But crisis planning is a little like estate planning — a very good thing to do that most people don’t do. Smith, who makes his living advising clients about how to create and implement crisis plans, says companies should actually have three plans:

1. Operation plan: what to do when a crisis erupts
2. Communications plan: what to say
3. Business recovery plan: how to get back on track

If you’re like most businesses and don’t have a plan when a crisis hits, here’s what Smith says to do:

1. Figure out as quickly as possible what you do and don’t know about the problem
2. Identify the key audiences that need to be communicated with (e.g., employees, their families, customers, shareholders)
3. Create your messages: what do you need to tell people, and who do you need to tell?
4. Do something! Fix the problem.
5. Continue communicating throughout the crisis period and after, until the situation settles down

Slashing Employee Perks? You’d Better Have Good Reasons

The Takeaway: Knowledge@Wharton kicks off the article with a cautionary tale from Google. Usually lauded for its employee perks, the company got into hot water with staff earlier this year when it raised the price of day care from $1,425 to $2,500 a month and the cost for two children from $33,000 to $57,000 a year.

Googlista parents faced a big price hike, sure, but the experts at Wharton warn that trying to cut any perk, even if its just Thursday donut day, is likely to enrage employees. Why? Wharton management professor Nancy Rothbard explains: “Once you have the perk, to take it away is seen as a violation of a psychological contract you have with your employee.” Another Wharton management professor, Sigal Barsade, concurs: “I do not recommend taking away perks… management needs to remember that taking things away from people almost always leads to feelings of unfairness.”

But what if belt-tightening demands that a perk get the axe? The only solution is a good explanation, and “increasing shareholder value” is unlikely to fly, says management professor Peter Capelli:

If you are taking anything away from employees, it’s important to explain the need for doing it. It helps a lot if the need is something driven by factors outside the firm. The need to improve share price isn’t going to satisfy a lot of people.

Fail to take people’s feeling of ownership for their perks into account when you take them away and you’re like to face some type of passive aggressive retaliation from employees such as working less hard or feeling less commitment to the company — and that can hit your bottom line as hard as the cost of the original perk. For much more on the pros and cons of reducing perks, check out the full article.