The recent report of an American university president taking a 25% cut to give his minimum-wage workers a raise was quickly defended by his institution as no ‘publicity stunt’. Those cynical amongst us might be less certain, especially if we recall a less recent but more famous pay cut in corporate America.
In 2012, James Dimon, then CEO of J.P.Morgan, took a widely publicised salary drop in response to a scandal in which his bank was fined £577m by British and US regulators over a series of risky trades that lost the bank nearly four billion pounds. What was less publicized was the 74% raise for Mr. Dimon the following year: a stark reminder of economist J.K Galbraith’s famous dictum that ‘The salary of the chief executive of a large corporation is not a market award for achievement. It is frequently in the nature of a warm personal gesture by the individual to himself.’
Making the occasional ‘warm personal gesture’ to those who work for you (never to yourself!) is a very short-term leadership strategy. For management theorist, Warren Bennis, leadership focuses on authentic personal relationships, not merely the short term objectives of Taylorism or scientific management. Although Bennis saw some overlap between leadership and management, compatriot John Kotter emphasised the view that leadership and management are different functions. For Kotter, leaders must have a vision and the personal qualities to force the organisation to adapt to that vision. He would argue that such skills are not needed for an effective manager.
A contrasting view is that the skills of management and leadership are not mutually exclusive and that managers can adopt leadership roles when required. Such a view would assert that leadership requires skills that most of us have, but few use. Management thinker Rod Heifetz writes persuasively about adaptive leadership that responds to the organisation’s needs. He would argue that such leadership can be taught to the most unlikely managers.
The core quality of leadership seems to be to lead by consistent example. This is particularly relevant to executive compensation at a time of widening inequalities between the highest and lowest paid employees, even in public universities. Gestures, like reducing the salary of the CEO, may make for good publicity but are no substitute for leadership that adapts effectively to a changing world, one that offers a sustainable vision built on trust.