Pfizer yanks Hank

December 22, 2006

Drug giant Pfizer reports that departing CEO Hank McKinnell will receive nearly $200 million compensation on his departure next February. Mr McKinnell is one of the increasingly rare breed of leader, a ‘lifer’, who has spent his business career working his way to the top of a major corporation. As the company faces major problems to retain its market leadership we explore the issues of valuing a corporate leader.

[The original post of December 21st 2006 was modified January 23rd 2007].
As a fellow lifer albeit in a different sector, I wish him well. Lifers have some empathy, even when incarcerated in different prisons, and bound with different kinds of handcuff.

Hank and I have served a total of several life sentences. In some ways mine in a more open prison to the end, although the longer I stayed, the greater reluctance I felt towards making a break for freedom.

The Handcuffs we deserve?

I estimate that Hank’s claim to compensation is around a thousand times greater than my own. It has become a question of our leaders: Do they deserve the rewards they get? Discussion suggests a range of views on this, ranging from never, to sometimes, to only for a few leaders who really made a difference. And that’s the rub. More often than not it’s difficult to arrive at a clear economic view.

For example, a leader’s contributions may be within a system which has only loose connections between real world impact, and financial rewards. For example, I don’t know how much the Pope influences people around the World, or how much is his remuneration.

What do you think?

From my academic resting place, I can argue (not particularly convincingly) that I have taught at least one person who went on to become a major political figure, and a clutch of business students who later became successful national and more rarely international leaders. I have served on boards with a few others from the ranks of the good and the great. Maybe, just maybe, my assorted writings or forays into business consultancy have influenced a company here and there.

What do you think? Should our thought leaders expect remuneration close to that of business leaders? Are our business acedemics in need of a leader to secure their rightful returns for their dedication to a lifetime of work? If you reply never or without a doubt, do you have a convincing argument – or are you just sharing your belief system about the leaders we deserve?

Afterthoughts

The thrust of this, one of the first posts to this Blog, was the currently fashionable issue of director remuneration. It lies at the heart of the debate on leaders. Can the rewards earned by strategic leaders be justified through their rewards? According to leadership texts, the answer is ‘sometimes’, although it turns out to be difficult to disentangle the impact of a leader from the consequences of wider economic variations (the rising tide, or falling tide effect).

For Pfizer, the issue could have been stated more clearly as follows. Hank McKinnell had presided over a rise in corporate furtunes, and then a decline. It appears that under pressure from major shareholders, his leadership style was confrontational, and his belief that he was worth a handsome final remuneration package may also have contributed to the pressures for change. Interestingly, the company has opted for a Lawyer to replace him, perhaps a signal of one major dimension that the new leader will have to confront.

As The Wall Street Journal put it :

Pfizer Inc. directors named Jeffrey B. Kindler, the company’s general counsel and a former McDonald’s Corp. executive, as chief executive, succeeding Henry “Hank” McKinnell at the helm of the world’s largest pharmaceutical company