CEO Sam Palmisano opened his pay to encourage teamwork at IBM.

January 6, 2009 by  
Filed under Super Earners


Fortune 500 CEO compensation contracts are typically closed to outsiders. That is, their contracts typically benefit them as individuals, and no one else. Like all other Fortune 500 super earner CEOs, Sam Palmisano, CEO of IBM, had such a contract.

But, Sam had a problem. The various division heads of IBM sometimes pursued their own results at the expense of IBM as a whole. Shifting his management team’s emphasis from me to we was a prerequisite for getting the best over all results for IBM. How to do it?

Sam’s answer was to break the CEO mold by choosing to open his pay. He requested that IBM’s Board of Directors vote in favor of making a substantial percentage of his pay available to incentivize his direct reports to work together. Results? Sam’s action helped bring the team out of them, which contributed to IBM returning a record $8 billion to investors.

Comments are closed.