Don’t pay employees more than they deserve

Performance of Pfizer stock under Hank McKinnell.
In July, I wrote about the firing of Hank McKinnell, the CEO of Pfizer. While a decision made too late, it was still good news for the company (disclosure: I do not hold Pfizer Inc. stock). As the chart above shows, he has been nothing but a disaster for the firm.

So why would Hank McKinnell still walk away with close to $200 million?

I am actually one of those people who thinks that in a free market for talent to thrive and for employees to be motivated, there should be no cap on executive compensation. I also oppose the minimum wage on the same ground (though I do feel that as a society we should help the poor and the needy even more). What an employee gets paid for her/his labor should be something that should be decided between her/him and the employer.

Having said that, does it make sense to pay him this kind of retirement package when he has acturally done a great job destroying shareholder value? The responsibility lies with the board of directors that negotiated the compensation package and did not tie it to the right metrics. Mr. McKinnell’s adventures in management did not benefit anyone. The company recently abandoned torcetrapib. It faces litigation related to Bextra and Celebrex. It took more risks than it was prepared for. It got distracted from its mission and pursued a wrong strategy. The company has also laid off thousands of employees, who were simply the victims of the incompetence of Hank McKinnell.

Conclusion: It is fine to pay what you have to in order to get the best people but then also make sure that you measure your employees on the right metrics.

Embedded advertising by Britney Spears

I had previously discussed what a remarkable job Britney Spears did with marketing of her Curious perfume. It does not matter whether you like her or not but we have to agree that she is a great businesswoman. All the way from divorcing her husband Kevin Federline (who by the way has a very funny new name now: Fed-Ex) to shedding her underwear and giving an eyeful to the world, she can use the media to her advantage.

Recently, while I watched a television report on how Hollywood celebrities are celebrating Christmas, she exploited the exposure to promote her perfumes. Watch this video clip as an excellent example of embedded advertising (other examples: GM and Comcast).