Mon • Oct 19th, 2009 • by Tom Nees • Comments 5
it’s a values question
Executive compensation and bonus packages are in the headlines again. Outrage from the White House as well as the public is growing over financial leaders who are receiving multi-million dollar compensation from companies that have prospered after receiving bail-outs, at tax-payer expense.
In defense of those who receive these lavish payments is the argument that as the stock market increases – as it has recently – they deserve to be rewarded for the prosperity that benefits everyone invested in equities including the millions of people dependent on their 401k retirement accounts for their future.
Whatever the fairness or justice in that reward system, it raises a question about the value system by which we decide what leaders should get paid.
“Earning isn’t leading,” contends Joanne Ciulla, professor of leadership and ethics at the University of Richmond in a Washington Post column on the failure of Wall Street leaders.
“The craft of leadership,” she writes, “focuses on producing benefit to others, not the leader.” She goes on, “Wall Street often equates people who know how to earn high wages with people who know how to lead. It believes that market systems, not value systems, are the best way to choose leaders. The first step towards building new leaders in the financial sector entails searching for competent people who care about the craft of leadership, not the size of their paycheck.”
Compared to average workers the size of CEO paychecks has increased dramatically in the recent past.
During the October 7, 2009 NPR Diane Rehm Show, Michael J. Sandel, a Harvard political philosopher and author of the new book Justice: What’s the Right Thing To Do? was asked about the growing compensation disparity between average workers and CEOs in America. In 1980 CEOs earned 42 times the pay of workers. By 2009, he said, CEO compensation has multiplied to 345 times that of average workers!
For the most part our value system accepts that leaders should be rewarded, if not motivated financially. But at some point that value system breaks down – when, as Michael Sandel observes, that the Chief Justice of the Supreme Court earns $200,000 and Judge Judy earns $25 million annually.
How much then should leaders be paid? It’s a values question. There is no standard for everyone everywhere. Each leader and each sector of society, based on stated or unstated value systems make those decisions. In these difficult financial times when a growing number of people are either unemployed or underemployed the values question cannot be avoided.
October 19th, 2009 at 7:30 am
I am sure much more thought could be put into this answer than what I am prepared to say off the cuff but it is appalling that a CEO could make 345 times that of the average worker. That is not justice. That is greed.
October 19th, 2009 at 7:34 am
“Earning isn’t leading!” What a powerful idea. While I firmly believe those in the private sector who seriously and industriously lead their organizations should be compensated accordingly, the gap between leaders and worker bees has been straining credulity. I not a fan of government coercion when it comes to setting executive compensation levels. I am thankful, however, that there seems to be more examination of what in some situations seems almost obscene compensation rates rendered to those who are affiliated with those institutions imperiling economic stability.
October 19th, 2009 at 8:01 am
I agree, and maybe we need a new term to describe those who create growth and momentum economically for everyone’s benefit. I think we get distracted too often by leadership stardom. Most of the great brand leaders I’ve studied have one thing in common, they all feel fortunate to be in their position. As if they did not really contribute to getting there, rather someone has to do the job and they just happened to be selected. Oh well. Business books do tend to focus more on the actions of great leaders rather than their desire to become great leaders. They do desire this don’t they?
The majority of compensation generated in the US economy is from the private sector. Yet, the average wage, of the 2 million federal civilian workers, is over 100k, while the average private sector wage is less than half that amount. (www.bea.gov). A Supreme Court justice makes 200+k a year, but are also in demand regularly for speaking engagements where they might be limited to 15% their salary annually, but enjoy all-expenses-paid travel and entertainment. And what of their post-career speaking engagement’s that pay them six figures for a brief speech. Now of course I think they deserve it.
October 19th, 2009 at 9:02 am
Tom, I know this can be a deep philosophical question. However, For servant/transformational/authentic leaders, my relatively uneducated father made it very plain to a small boy (me) when he said “if you are not doing well financially, you aren’t taking good enough care of your pastor”. The obvious unspoken lessons included: 1. It’s not about you! 2. Kingdom work is more important than any other. & 3. Leading other by serving is important. I still find this to be a ggod perspective when I get introspective about my own earning power.
October 22nd, 2009 at 3:49 am
When I think of companies who pay executives exorbitant wages to farm more and more of their businesses into contract work, day labor and overseas just to avoid paying a living wages and descent benefits… When I drive down Jerusalem road and see mansion after McMansion while others in the same communities are living in hotel rooms and shelters, I’m really sad. A correction is needed…
I would like to believe that the government exists to curb these excesses, and thus to protect the poor, but guided by experience, I have very little confidence in the government to do the right thing either…
Is the church our only hope? The correction needed is, at it’s root, a moral issue. Is the church any hope?