CFO magazine (along with the usual sources) reports that
at Raytheon’s annual meeting yesterday the company announced that
it would freeze CEO William Swanson’s salary at its 2005 level and reduce
his restricted stock eligibility by 20%. Not that he’s suffering:
"In 2005, Swanson’s salary was $1,120,934, up 15 percent
from the prior year. His restricted stock awards were worth nearly $3
million, up more than 25 percent from the prior year. Altogether, Swanson
earned more than $7 million last year."
You will recall that The New York Times broke the story last
month that Swanson’s claim to fame in CEO-dom, "Swanson’s Unwritten Rules
of Management," was plagiarized nearly wholesale from a 1944 book, "The
Unwritten Rules of Engineering," by W.J. King, an engineering professor
at UCLA. The similarities were discovered by Carl
Durrenberger, a chemical
engineer and—surprise—blogger, in San Diego.
Before the plagiarism discovery, Raytheon had distributed 250,000—300,000
free copies (reports differ) of Swanson’s booklet, and Swanson had gained
more than a bit of fame for his folksy aphorisms, such as “Be extremely
careful of the accuracy of your statements.”
Raytheon has, to state the obvious, stopped distributing the booklet,
and here’s what they had to say about the wrist-slap given Swanson:
"The two officials also stressed that the board is taking the
matter very seriously. Nevertheless, they insisted, the situation shouldn’t
overshadow Swanson’s “extraordinary vision and performance” in leading
the company during the past three years."
As for "extraordinary…performance," I beg to differ. Here’s
Raytheon’s stock price (blue) vs. the
S&P 500 (green) for the past three years.
To my eye, it pretty much looks like Raytheon is pacing the index:
However you choose to interpret the chart, "extraordinary"
performance it is not.
Now, why are we taking this detour from "the economics
of law firms?"
Integrity, character, and trust.
Without them, your CEO, or your managing partner, is quite
literally nothing and no one. Forgive me for stating the obvious,
but this is something Raytheon’s Board
of Directors evidently could afford
to be reminded of.
The firm claims to subscribe
to these values, among others:
- "Integrity
- Be honest, forthright and trustworthy.
- Use straight talk; no hidden agendas.
- Respect ethics, law and regulation."
Now, don the hypothetical hat of any employee, from factory worker to
senior manager, at Raytheon, and tell me whether you buy that value statement.
The "message sent" by the Board was, we "tak[e] the
matter very seriously." The "message received" by the
world was, "Swanson’s still CEO." I am deeply distressed at having to say this, but when will people learn? Integrity is simply non-negotiable. Full stop.
