How important is the CEO of a company?

Boeing, Nike and Starbucks have all changed chief executives in recent months. But how important is the leader in successfully running such large companies?

“There’s just a cat in the hot seat,” said Alan Lafley, CEO of global consumer goods giant Procter & Gamble from 2000 to 2010 and from 2013 to 2015.

With P&G selling everything from Pampers diapers, to Head & Vais shampoo and Fairy laundry detergent, P&G has more than 5 billion customers around the world. And its workforce now exceeds 107,000 people.

Mr. Lafley equates leading a company of such a large scale to being the manager of one of the English Premier League teams. Specifically, he said that this job comes with the risk of being fired if the results are not as good as expected.

“With football players, if they have a bad season, they won’t leave,” he said. “Instead, the coach or manager will leave.”

Coffee giant Starbucks announced a CEO change in August, after sales declined due to factors including a complicated menu, fierce competition in China and boycotts related to war in the Middle East. It is hoped that new boss Brian Niccol can turn around the company’s fortunes.

To lure him away from the success he is having running the American restaurant chain Chipotle, Starbucks is paying him more than $100 million in his first year, plus the use of a private jet to allow him to travel. 1,000 miles from home. in California to the company’s headquarters in Seattle, Washington state.

“Obviously there’s a lot of hope for him and the ability of that company to turn things around,” executive coach Alisa Cohn said. The person explains that top salaries are set by a company’s board of directors and reflect the expectations they have of the CEO. are appointing.

Investors welcomed Mr. Niccol’s appointment, with Starbucks shares rising 24.5% on the day it was announced. On the same day, Chipotle decreased by 7.5%.

Mr. Niccol is continuing his efforts to simplify Starbucks’ menu.

Ms. Cohn added: “CEOs are the ones who set the strategy for the company. “They are the ones who set the culture for the company, and frankly, it’s no longer their responsibility.”

Marcia Kilgore is the Canadian entrepreneur behind the skin care brands Soap & Glory and Beauty Pie, along with shoe company Fitflop. She says the CEO role is complex, demanding and important to the company’s success.

“You need to have someone who can really look at the different work streams that need to get done and get them organized and prioritized,” she added.

“And someone who can make sure that different groups within the company are working together in harmony and make sure that there’s no wasting time, wasting money and energy on things that don’t affect the company. .”

A failure to make the right choices and lead teams in the right direction is why Mr. Lafley became P&G boss in 2000.

His predecessor, Durk Jager, resigned due to the failure of the large-scale global restructuring he led. The cuts of 15,000 jobs and 10 factories were intended to boost profits, but instead led to repeated profit warnings and a steep decline in share prices.

Mr. Lafley said that as CEO, it is important not to do everything yourself but to “enable and empower people in the organization” to do what needs to be done.

“We had 100,000 people come to the new CEO to tell them two things – ‘what happened?’ and ‘what do we do next?’.”

He explained that he had decided to refocus the company on serving customers and innovating new products, and told employees that “I am confident that all of us will lead us out of current position and get back on track.”

Mr. Lafley added that clearly communicating his plans to employees was “so important” that in the days before Zoom, he flew around the world to meet with employees in person.

Inspiration and communication also appear to be central to the approach of new Nike CEO Elliott Hill. When he got the job in September, he wrote to employees to tell them he had “great confidence in my team and our future together” even though sales were down. for many years.

Ms. Cohn, who has worked with companies including Google, Etsy and Johnson & Johnson, said that regardless of the new CEO’s plans, confidence is vital to any success.

“The most important quality you need to be a CEO is knowing that you can be a CEO,” she said. “You need to have a healthy sense of confidence and ego.

“The second thing you need to offer is adaptability. You have to be able to assess the situation, make some key decisions and then adjust them as you go.”

It’s not something that can always be taught, which is why she said so many people get “stuck” at lower levels in the company. “You need to develop your own inner state to know that you can handle the pressure, the difficulties, the spotlight,” Ms. Cohn adds.

That pressure is one of the reasons why top CEOs are often paid so highly. When it comes to the S&P 500 group of America’s largest companies last year, the top earner was Hock Tan at Broadcom with $162 million, followed by Nikesh Arora with $151 million at cybersecurity firm Palo Alto Networks and Stephen Schwarzman for $120 million at cybersecurity company Palo Alto Networks. investment giant Blackstone.

According to executive consultant Equilar, the average income of an S&P500 CEO last year was a record $16.3 million. That means they’re making 196 times more than the average worker at their company, and critics say CEOs aren’t that much more valuable than their employees.

“This is based on the foolish notion that the person in the corner office is almost single-handedly responsible for the value of the company,” said Sarah Anderson of the Institute for Policy Studies.

She thinks it’s a problem that’s getting worse and spreading around the world. “I think paying runaway CEOs is bad for our economy, bad for democracy and bad for business,” she added.

Mr. Lafley agrees that the ratio between employee and CEO pay is “too high,” but it stands to reason that companies must compete to attract the best talent.

He thinks the answer lies in paying CEOs “a fairly modest base salary, and then everything else is an incentive.”

“In the end, it’s like being a coach. If you don’t motivate people and don’t allow them to do what you ask, you’re not getting the job done.”