Bold Leadership: Walking the Walk on Pay for Performance

Posted on January 11, 2010

0


Last week, Jeff Smisek took over as CEO of Continental Airlines. As reported in the Houston Chronicle, one of Smisek’s first acts was to give up his annual salary of $730,000 and any bonuses until the airline earns a full-year profit.

In a letter to the company’s employees – the full text of which can be found here – Smisek writes that “I am willing to [refuse to accept any salary or bonus] because I have faith in you, and because the tone for any business is set at the top. I am not asking you or anyone else to reduce their pay. What I am asking is that you join me in making Continental profitable again. I’m asking that you do what you do best – provide our customers outstanding service while working more efficiently, bringing in new revenue and out-performing the competition.”

I’m impressed.

Smisek’s decision is a display of real leadership, and provides a sharp contrast to the actions of Wall Street executives who have fought tooth-and-nail against changes to their compensation models. And while I haven’t come across employee reactions to the move, it’s hard not to respect the gesture being made. He is taking a “we’re all in this together” attitude to a new level.

If nothing else, it’s pretty refreshing to see the CEO of a major company put the needs of his employees, shareholders and customers first in such a bold way. It will be interesting to see if other executives follow his lead.