Win Churchill's Winning One-Liner

I always take pleasure is seeing good things continue to happen for my past authors. My congratulations to Win Churchill on his receiving the Yitzhak Rabin Public Service Award from the America-Israel Chamber of Commerce this month. Churchill is a founder and managing general partner of SCP Partners, a venture firm that has invested in many Israeli start-up companies.

"I have received many awards in my life for charitable efforts," Churchill said in an interview with the Jewish Exponent, but the newspaper reported that he points with particular pride to this latest honor. "We are plowing money back into the Israeli economy. ... In terms of covering the broader areas of my life, this is the best award ever."

I have an award I would give Win Churchill. It would be the award for the best one-liner about executive compensation to ever appear in the pages of Directors & Boards.

Let me set the context. In late 1993 Churchill was the kickoff speaker for the inaugural session of a new corporate governance program being launched in Philadelphia — the Wharton/Spencer Stuart Director's Institute (formed by prime movers Dennis Carey and Robert Mittelstaedt). He was then chair of an investment firm, Churchill Investment Partners Inc., that he had formed in 1989, a few years after practicing law for a lengthy spell with a Philadelphia law firm. He was also serving on several boards then, as chair or director. So with that background he had quite a bit of wisdom and counsel to offer to the attendees of this board educational initiative housed at the Wharton School.

His talk was titled, "The 10 Commandments of Ownership." (I kept that title when I published his speech as an article in the Spring 1994 edition of Directors & Boards.) He presented a set of guidelines for how institutional investors should be thinking about exercising their role as responsible professional owners. The guidelines had crossover application to how board members should be acting as responsible overseers.

Commandment 9 is the one that wins the alltime best one-liner award for governing executive compensation: "Successful management should end up wealthy; unsuccessful management should not end up wealthy."

Now, I ask you: Is there not more wisdom in this baker's dozen worth of words than in any, or all, book and article texts ever devoted to the topic of managing exec comp?

Win, the award is all yours.

Exec Pay: A Campfire Tale from Bohemian Grove

Supreme Court nominee Sonia Sotomayor is getting flak for her membership in the Belizean Grove, an elite all-women's club. As the AP reported, the Belizean Grove "bills itself as women's answer to the 130-year-old male Bohemian Club in California."

The Bohemian Club's Bohemian Grove activity (photo from past gathering) is a two-week retreat in July in the redwood forest where the rich and powerful in the business and public sectors come to play — and actually take in some enlightenment, too. According to this fact sheet, "There are speeches, known as 'Lakeside Talks,' wherein high-ranking officials disseminate information which is not available to the public at large."

Generally what happens at the Bohemian Grove stays at the Bohemian Grove. But one of these Lakeside Talks surfaced 25 years ago and came into my possession, sent to me by the gentleman who delivered it — a quite senior board member of several major industrial companies. With tongue not all that lightly planted in cheek, this corporate statesman delivered a volley of zingers at the Grove habitues. A sample:

"While not in the management manuals, here are a few tried and true ways that corporate leaders have developed and refined over the years to guarantee freedom from want.

"First, you appoint an executive compensation committee composed exclusively of outside directors. This allays suspicions from critics, and it is risk-free as long as the members are chosen with care. And, of course, you choose them.

"The next step is to have the compensation committee adopt a resolution stating, in effect, that in order to obtain, retain, and reward superior executive personnel it is the policy of the company to pay compensation above average competitive levels.

"Such a policy will never be successfully challenged. It is a 'motherhood' issue. The logic is unassailable. Good performance deserves above-average recognition. Poor performance requires above-average motivation.

"With this policy in place, the third step is to couple it with an annual survey of the compensation practices at your 'peer' companies, on the modest assumption that there are any. This is standard operating procedure and it virtually guarantees an ever-rising level of top-executive compensation."

There may be a double standard that's working overtime among Sotomayor's critics. That's bad enough. What's sadder to contemplate is that if the Belizean Club dispenses this kind of insightful counsel by the powerful and the privileged on the uses — and abuses — of power and privilege, how regrettable that Sotomayor is feeling forced to resign her membership.

Exec Pay Limits: A Page Out of the Mob Playbook

As soon as President Obama earlier this month announced an initial plan to restrict executive pay, critics lost no time in pointing out the infirmities in the proposal. One loophole that immediately was espied: configuring titles so that a particularly highly paid exec would not appear as an officer of the parent company, thus escaping disclosure. 

There is precedent for such legerdemain. It comes right out of the Mob playbook. 

Prime exhibit: "Casino," a 1995 film — based on a true story — of Mafia-run Las Vegas in the 1970s. Actor Robert DeNiro, in one of his many great film roles, plays a gangster named Sam "Ace" Rothstein, boss of the Tangiers Casino. But since Rothstein has a past criminal record when the Mob inserts him to run the casino, he can't appear in the regulatory filings as the CEO of the gambling establishment. 

So what title does he give himself? He actually holds three titles over the arc of his tenure running the Tangiers. He first sets himself up as Public Relations Director, then spends most of his time as the Food and Beverage Director, until finally closing out his leadership of the casino as Entertainment Director.

It worked well for the Mob, so why not for Corporate America? Let's test the notion out on a few high-profile situations:

• Bank of America CEO Ken Lewis could take on the title of Regional Manager-Charlotte.

• GM CEO Rick Wagoner could become Senior Labor Relations Negotiator.

• And why not Chrysler CEO Bob Nardelli as Private Equity Executive in Residence?

• Citigroup CEO Vikram Pandit could take on the mantle of Chief Restructuring Strategist.

• For Time Warner CEO Jeff Bewkes? Why, none other than Head Script Reader, of course.

• And for General Electric CEO Jeff Immelt, how about Locomotive Sales Chief? Or, Chief Jet Engine Inspector? Lots of possible titles in that conglomerate.

Farcical? You bet. But we're in early days of parsing these pay restraints. Who knows how the wiseguys in the corporate suites will emulate the wiseguys in the mean streets.

Before we leave "Casino," there is one line in the movie that should cause all corporate governance mavens to recoil. In referring to the cash-skimming and other financial shenanigans taking place on the casino floor and back office, DeNiro's Ace Rothstein defiantly declares, "The board of directors didn't know what the f**k was going on." Then and now ... on the silver screen and in real life ... too sad but true for our financial institutions that were little more than gambling joints.

Oh, by the way, Al Capone's title on his business card supposedly read Secondhand Furniture Dealer.