THE PARABLE OF AN ORANGUTAN CEO

Magma Oil’s CEO, Jack Cook, died in a freak accident involving a turkey fryer. The Board of Directors, overseeing a staid and boring publicly traded oil company, were bitterly divided regarding a replacement and settled on a bold, innovative plan; they would hire Ken Allen, a Bornean orangutan, to serve as CEO. No expensive consultants and attorneys were required; the compensation plan was simple, a base salary of bananas and fruit coupled with bonuses of cabbage awarded for outstanding financial performance. Golden handcuffs were abandoned in favor of a steel cage, the deal was struck and ratified by the Board.

On July 31, 1990, Ken Allen began his tenure as the first primate CEO of a public company.  Three days later, Saddam Hussein invaded Kuwait, and global oil prices climbed from $17 to $36 a barrel. Magma’s revenues and stock price soared, and the Board hailed Ken as an extraordinary leader. In just days, Ken Allen increased the sales and profits creating immense value for the shareholders and enormous bonuses for Magma executives. Many companies tried to emulate Magma’s example. Companies hired lowland gorillas, others hired chimps, and one company hired a baboon but found the baboon’s expression too mocking, so they hired a macaque instead. The demand for apes became so significant that the UN banned the export of primates for C-suite positions citing concerns over exploitation. Despite their swell in executive ranks, no ape ever matched Ken Allen’s success, and eventually, most companies abandoned the experiment due to the smell and regular cleaning required.

Back at Magma, things began to unravel. Ken Allen, flushed with success, demanded a larger office, a bigger cage, more cabbage, climbing rocks, a rope swing, and conjugal visits. Meanwhile, Sam Slipshorn, the only independent director at Magma, returned to the US after his year-long participation in the Whitbread sailing race. When Sam went to visit his close friend and fellow Grinnell College alum Ken Allen, he discovered that this Ken Allen was an orangutan. Incensed by the spectacle, Sam demanded a special meeting of the Board to remove the CEO.  Directors vigorously defended Ken and argued that Magma’s stellar financial results justified his retention. In the end, the Board capitulated when Sam noted that the corporation’s 10-Q filing failed to disclose that Ken Allen was an ape and that SEC action might ensue. A vote on a proposed change to the By-laws was also authorized requiring homo sapiens as C-suite executives, over the objections of PITA and its animal rights supporters. Having lost his job, Ken Allen returned to the San Diego Zoo.

Ken Allen was not mythical; he was a real orangutan that lived at the San Diego Zoo. Although Ken never served as a CEO, boards face many of the same considerations. Accountability is a tenant of corporate America, but "cause and effect" are often implied but not required. Ken Allen’s success was the product of Saddam Hussein’s performance. Paying a bonus to Ken breaks the connection between cause and effect because Magma's results were unrelated to Ken's performance, yet Ken and his team benefited. While most compensation packages are structured to compete with compensation paid to executives by industry peers, do compensation packages consider company performance versus industry peers in computing and awarding bonuses? If all companies in an industry experience 10% annual growth in revenues or profits, it is the market, not the management driving value. If one company consistently outperforms its peers during upturns and downturns, those are the executives who deserve bonuses for outstanding performance? 

Ken Allen died in 2000 at the San Diego Zoo. Ken was known as an escape artist and was nicknamed “the Hairy Houdini.”  When considering executive compensation packages, remember the lessons, life and times of Ken Allen.