The Ethics of High Pay

Since we’ve been talking about extreme compensation issues on this space lately, I thought it might be interesting to take a closer look at the ethical issues that surround getting paid 5,000 times more than your line workers do. Americans have a long and rather ambivalent history of both dismissing and wanting to be among the super-wealthy; the stereotypes of rich people as useless drones who can’t cope with the most trivial tasks and of the self-made man (who started with nothing and is now richer than any king) are both entrenched parts of the American mythos. Many people deplore nine-figure compensation packages and rail against them as monuments to greed and examples of the rich sucking the lifeblood out of the workers, yet I feel we are justified in asking how many of these same people would refuse such wealth if it were offered to them – and if that would actually be the best course of action anyway…

Now, I’m not talking here about the people who pack their board of directors with cronies, who then vote for outrageous compensation packages for the CEO while knowing that he (or she) sits on their board in turn and will return the favor. That sort of thing IS unethical (although unfortunately very common) and requires no further examination. Neither do companies that lay off people and outsource their jobs in order to pay senior management more, companies that raid the corporate pension fund to support the lifestyle of senior executives, or companies that allow the CEO to spend millions of dollars on risqué birthday parties for his spouse. All of these are cases that have appeared in the news over the last few years, but there’s no “other side” to this discussion (e.g. no one is going to argue in favor of these things)…

Let us instead consider what you might do if the company that hires you wants to make you the CEO and pay you $100 million for your services. The first thing might be trying to earn the money. Compensation plans in that range usually involve stock options, and if you can use your industry knowledge, strategic brilliance and innovative new ideas to achieve higher sales and a stronger stock price, you probably deserve a piece of the action. Certainly, if you can achieve a $700 million increase in overall stock value, gaining a 15% share of that achievement no longer looks quite as outlandish. By the same token, if you can improve wages and working conditions for your employees, lower the company’s carbon footprint, and help to improve the country’s trade imbalance (by exporting product instead of jobs) you’re probably entitled to a nice reward, and if you can do all of that while keeping the factory open and saving the town your firm is based in, they’ll probably throw you a parade, too…

Of course, if that isn’t enough for you, you could take some of your $100 million and do good works with it. You could build the town a new health center and a new library; offer to match funds for a new high school facility and a new senior center; sponsor community college programs and endow scholarships for local kids who want to go off to college. In doing so, of course, you’ll improve the health, education and quality of living of the people who live in your town, generating huge improvements in both public relations and worker productivity, and ultimately making even more money for the company. But you could always re-invest that in the community, too…

It’s important to remember that all of this, especially the doing good works without causing even worse damage by accident part, is extremely difficult. There aren’t more than a few hundred people in the world who can do the things I’m describing successfully, and therefore they command the high price that a scarce resource always does. But even more to the point, the idea that money – even when paid to a single individual for doing a job – is somehow evil is ludicrous. Money is a tool, nothing more; it’s what you do with it that makes it (and you) truly good or evil. And if you believe yourself to be a truly good person, then it stands to reason that you could do a lot of good with a lot of money…

It’s worth thinking about.