Does your boss make too much?

When my daughter graduated from the sixth grade, she asked me to come to an awards ceremony because she d be collecting an award or two. I thought I'd be in and out in less than an hour. Boy, was I wrong.

The ceremony lasted three hours because everyone in the sixth grade got an award for something. An endless parade of children all marched up to the podium for one kind of recognition or another - Best Athlete, Worst Athlete, Comeback Kid of the Year.... The process denigrated the value of the awards for the kids who truly were deserving.

It's the beginnings of the ever-growing notion that everyone brings equal value to his or her environment. That's one reason it has become a popular American pastime to knock high-paid executives. They're never portrayed as extremely smart, reasonable, well-intentioned, fair or good looking. (There's some truth to this stereotype - when it comes to CEOs. My many sources and numerous years of experience substantiate that the overwhelming majority of chief executives are, in fact, not very good looking, at least not in comparison to CFOs, who are almost always extremely good looking. I'm not sure why this is.)

But the image conjured up by the media - of a Type-A, Scrooge-like character whose biggest pleasure is squashing some poor, downtrodden and yet loyal employee - is unfair. "Now, see here, Jenkins, you've got a lot of nerve asking for a raise when you know the country club just raised my dues. Besides, didn't I just give you a raise?" "Three years ago, you say?" "Even so, with the membership cost going up and all that's going on with the economy, I can't do it now. You understand, don't you? Of course, you do."

I learned a great lesson at an early age: Sometimes, it doesn't matter how hard you try; sometimes, some people are just better at some things, and because they're better, they get whatever rewards go with their turf. When I tried out for my high-school basketball team, I gave it everything I had. The coach told me I put forth more effort than anyone else - just before he cut me from the junior-varsity team and made me a manager. (You have to be really bad to get cut from junior varsity.) You see, they didn't keep everybody. Everybody didn't get to play. As a manager, I had to be Johnny-on-the-spot when one of the players needed a towel. I also had to mop the floor at halftime in front of the rest of the student body. That's sobering work - but worthwhile.

WHAT'S ANOTHER MILLION?

Critics of high executive compensation point to the Japanese system. In Japan, the pay ratio between CEOs and the average worker is seldom more than 25 to 1. According to the Frederick W. Cook and Co. consulting firm, the pay ratio between the average American CEO and the average American worker has doubled over the past 20 years from 30 to 1 to 60 to 1.

Another factor contributing to much of the prevailing thinking is the rhetoric of the CEOs themselves. I haven't worked for one yet who didn't say stuff at annual meetings like, "Our greatest strength is our people. You're the ones doing the real work." I guess this is supposed to sound humble and make the CEO seem like a regular guy. "Hey, he's just like us, puts on his pants one leg at a time. What a great guy! I understand he even makes his own coffee in the morning. Imagine that!" I promise now, before all the readers of this magazine, never to say my staff members are the only ones doing the real work, because I know I'm really working, too.

The fact is the CEO isn't a regular guy, at least I hope he isn't. I want the CEO of the companies I work for to be smarter, harder working, more creative and, yes, more arrogant than the "regular" guys. In fact, I want all the executives to fall into these same categories. (Note: It's vital they check the "smarter," "harder working," "more creative" boxes before they check "arrogant.") If they produce the necessary results, then I don't care how much they get paid, because if they're making things happen, I'm going to benefit, too.

Obviously, the compensation should be reasonable, but reasonable may be a very big number. For example, it's not likely the CEO of a $20-million company should be paid $1 million annually. But what if the company made no after-tax profits under the direction of the puts-on-his-pants-one-leg-at-a-time CEO earning $120,000? And after the new, $1-million CEO arrived, the annual after-tax profits increased to $5 million? If I were a stockholder, I'd gladly pay that million bucks - and throw in a boat, too. If I were an employee, I'd be jealous of the boat and envious of the salary and happy I was working for a financially stable company.

If I were one of the employees downsized out to make the company so profitable, of course, I'd be very unhappy. But if the company were able to flourish in my absence, I'm not sure my unhappiness should be the reason the CEO doesn't get paid what he's worth. It's not that I don't have some appreciation for the effects of downsizing. A couple of years ago, my mother worked for a company that downsized her out of a job. For the first time in her life, this immigrant woman, who taught me the meaning of hard work and to never give up, was forced to stand in an unemployment line. She was devastated. I can remember her saying how useless she felt, but the fact is she survived and found another job. (Hey, if I had to do it over again, I'd still let her go!)

Several CEOs tote salaries you could consider excessive. For example, Roberto C. Goizueta, CEO of Coca-Cola, had a 1995 pay package worth $16 million. According to estimates by compensation expert Graef Crystal, "[Goizueta] has made more in his [15-year] tenure than any CEO in the history of the world." In other words, he's done very, very well. But Crystal goes on to say that if someone invested $100,000 in Coca-Cola in March of 1981, when Goizueta took over, he'd be sitting on $4.4 million by the end of 1996. Is the CEO worth $16 million a year? He's probably worth $60 million a year, and I bet his CFO is worth a lot, too.

But here's the catch: For every one chief executive like Goizueta, 20 aren't worth what they get. Those executives shouldn't get their pay cut - they should get the ax. If they're the captain when the ship goes awry, they aren't worth one penny.

A FIXER-UPPER

How many of you have walked into situations where the previous CFO left a horrendous mess? I started one job at which the CEO told me, "You have my full authority to do anything you want to straighten this out." At another company, the CEO said my predecessor told him he could have either the bills or the financials out on time. "I'm greedy. I want both," he told me. The CEO of my current company, a balding, unattractive man just like the other two, told me my mission was to get the financials out by the 20th of the month. I didn't tell him if they weren't out by the second, I'd resign in disgrace. The point? If a company is in trouble, the executive who fixes it is worth a helluva lot.

The Washington Post reports American firms pay huge amounts of money to their executives to keep profits high, even if it means downsizing. This pushes stock prices higher. On the other hand, Japanese firms have been less willing to fire workers and, as a consequence, their profits and stock prices have suffered. Ira Kay, director of compensation consulting at the management consulting firm Watson Wyatt Worldwide, asks a very compelling question: "Which would you rather have your pension plan be, one that is secured by the American stock market or one secured by the Japanese stock market?"

Many things in our society are unfair. But the compensation of successful executives isn't one of them.

Mr. Falconi is CFO of a defense contractor in northern Virginia.