What do I mean by The director’s crisis?
Since hourly salaries for directors have been introduced, many companies and organizations have been democratized. Although the directors still bear the risk of bankruptcy, they are no longer the “boss” who makes all the difficult decisions and who is responsible for everything. These days, most directors do not even carry much more responsibility than the average department manager.
Then there was a time when if the company suffered a loss, it made cutbacks but the director still put the company proceeds in his own pocket. But now directors not only pay themselves for the additional risk that they still bear but also for the additional responsibilities that they have not been carrying for decades.
Hourly salaries for directors have also caused another problem
However, hourly salaries for directors have also caused another problem. It is no longer possible to replace entrepreneurs and the directors of small organizations. As a consequence, most small businesses and organizations are now going bankrupt within five years after the founder/director’s retirement.
Traditionally, ten years before his or her retirement, a director would appoint a substitute which they would then train. In those ten years, the substitute would receive regular salary increases, and when they took office as the director, their salary would increase even further.
As a result, it has become impossible to educate replacement directors
Nowadays, the substitute’s salary still increases during their training, but not when he or she takes over as a director. However this leaves the case that around five years later, he or she may arrive at the curious situation that, based on their increased experience, he or she can earn more at another organization as a regular employee than as the director of the organization they head. As a result, it has become impossible to educate replacement directors.
To solve the replacement problem, boards often appoint directors from outside. Unfortunately, they often lack the knowledge and experience in the specific field of work that is required to be able to solve many of the company’s problems. This creates a director’s crisis, whereby one of the employees may grab hold of power while the rest of the employees are off looking for another job. These events signal the end of the organization.
they often lack the knowledge and experience in the specific field of work that is required
The solution to the director’s crisis is to introduce democratization. In a crisis, the director asks the employees for advice. Based on their knowledge and experience, every manager makes a proposal that, from their perspective, will offer the best solution to the problem. The director then makes a choice between the proposals and settles the issue.
In this scenario, the director still bears the risk, but only part of the responsibility. This means a director is entitled to a higher salary than ordinary employees. But not as high as the case would be when he or she would be the “boss.”
with this demand, employees would be cutting off their own noses too
It is important for people to realize that entrepreneurs and directors play an essential role in companies. Without entrepreneurs, companies would never get off the ground. Without directors, these companies would go bankrupt when the entrepreneur calls it a day. This essential function is therefore highly valuable, a fact that is to be expressed in the salary the director takes.
Should directors be punished for the forty years during which they abused their power to increase their own salaries? Maybe. But with this demand, employees would be cutting off their own noses too.
The alternative to large companies who are cutting salaries and creaming off employee benefits are medium-sized companies with a few hundred employees, managed by entrepreneurs who have an interest in paying their employees a good salary, allowing them to attract good employees.
Only when employees are willing to pay entrepreneurs and directors more, will it be possible for them to also earn more in the future
But there is not a single soul in the world who would do all the work necessary to set up a medium-sized company if he doesn’t know beforehand that he would be earning considerably more than his employees.
Only when employees are willing to pay entrepreneurs and directors more, will it be possible for them to also earn more in the future.
Smart savings make companies healthy
- The real cause of unemployment and business losses
- Cause and solution of business losses
- How big can business losses get?
- The accounting method of the Dutch guilds
- Mistakes when cutting back and the cause of high unemployment
- Healthy and unhealthy companies
- Dutch money management
- Entrepreneurs and CEOs’ salaries after cutting back
- The director’s crisis
- Personal income of a million dollars or more
- Fair methods to calculate salaries
- Cover budget deficits
- How slavery causes business losses
- America and the problems of the former colonies
- The budget deficit of the Church
- About the author