Thursday, November 11, 2010

Mega Salaries and Superman CEOs

From time to time Christians get concerned about the enormous salaries paid to the CEOs of some big businesses. We should be careful about making accusations of sin in these situations.

If the board of directors freely offer a CEO a mega salary (without blackmail, lying or coercion) it has not sinned, if the CEO represents value to their company. They are in the best position to decide what the company needs.

If the CEO accepts the offer, he has not sinned.

If the CEO is a Christian, he is accountable to God for what he does with it. Having control of such a large amount of money gives him enormous responsibility. Much is expected from those to whom much is given. The elders he submits to have a right to challenge him about what he does with his income. They should also pray for him that he has the wisdom to do the right thing.
The church does not have the right to declare particular salary levels immoral. When the church tried to set a just price for bread, it got it into all sorts of problem, often causing shortages of food. Efforts by the church to set a just wage are equally misguided.

The problem of mega salaries arises from the proliferation of huge businesses in America. Very few people have the capability, the experience and the energy needed to manage one of these businesses and many who take on the task fail. This means that when a mega business is search for a new CEO it is fishing in a very small pool. Since the demand outstrips demand, the price tends to go up. This is why CEO salaries are so high.

The root of the problem lies not with the salaries, but with the American business model. Limited liability laws and other federal laws that protect big corporates have encouraged the emergence of this mega business model, but this model is wrong. Controlling a large amount of resources with a hierarchy of power is the way of the world. The Christian model is many smaller businesses linked through networks of relationships.

If the laws that protect big business power were removed, the size of American business would shrink. Forming large conglomerates would be unnecessary and too risky. This would lead to a greater number of smaller businesses doing the same things more effectively. These smaller businesses would be much easier to manage, so the demand for superman-CEOS would disappear. Mega salaries would disappear with them.

1 comment:

Steve Scott said...


Here in the US, small business is at an extreme disadvantage, and micro business is nearly impossible, as startup costs (by law) are greater than what one could expect to earn.