CEO payments – Ask the Rabbi
Q. How much should a company pay its CEO?
A. The answer has nothing to do with what the CEO thinks he can squeeze out of the company. It is the moral question of what is the right thing.
Is there a fair way of assessing what a good CEO is worth?
Because the job requires an extraordinary array of skills and a huge level of responsibility, it recalls that the sages say, l’fum tza’ara agra – “according to the pain is the gain” (Avot 5).
But somewhere there must be guidelines as to what is appropriate and just, and the criterion cannot be what the market can bear. Nor can it be based on what it costs to finance a luxurious lifestyle since no-one can eat more than one dinner at a time and living austerely can make you just as happy (indeed the simple life is generally more enjoyable).
The criterion is partly connected to the issue of whose money it is that is being paid to the CEO. The money belongs to the shareholders and ultimately to the public.
If less money came to the CEO there would be more to give to charity. Since so many people are in economic distress, why not help those who are suffering? Without exorbitant salaries a company could also afford to give improved service to its clientele.
We should not be swayed by the argument that the commercial world is a cut-throat neighbourhood and if one company reduces salaries the executives concerned can always sell their skills to another.
The whole commercial world needs the moral courage to formulate a common policy and to accept responsibility for setting standards.
