Bold Leadership: Walking the Walk on Pay for Performance

Posted on January 11, 2010


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.