In January 2007, the World Economic Forum (WEF) and the Swiss Federation of Churches co-sponsored a discussion on Chief Executive Officer (CEO) salaries. The WEF, a gathering of leading business and political leaders, meets annually in Davos, Switzerland, and its concern with this matter is no surprise—CEO pay affects whom a company can recruit as well as the bottom line. However, the participation of the Federation of Churches indicates that rising CEO salaries have raised ethical concerns. This explains the heated rhetoric at the January meeting. Thomas Minder, CEO of a Swiss cosmetics firm, refused to mince words when describing the pay packages of some of his colleagues: “It’s actually theft.”1

The issue at stake is whether large CEO salaries exemplify greed. Is this yet one more example of a society infatuated with “unjust gain” (Prov. 1:19)? However, there is more at stake in this question than the appropriateness of a CEO’s “golden parachute,” the bundle of benefits he may carry with him into retirement. Some argue this is the very problem with capitalism—it is rooted in greed. Not so fast.

Thomas Sowell, Hoover Institution economist and philosopher, tackled the question of CEO wages. In his straightforward manner, he asked, “Why do other people choose to pay corporate executives so much?”2 Sowell pointed out that the CEOs who earn the most have salaries set “in corporations owned by a few giant investment firms.”3 The CEOs who earn the least have compensation packages crafted by corporations beholden to thousands of stockholders. Sowell states: “In other words, it is precisely where people are spending their own money and have financial expertise that they bid highest for CEOs. It is precisely where people most fully understand the difference that the right CEO can make in a corporation’s profitability that they are willing to bid what it takes to get the executive they want.”4

Sowell made a traditional and powerful point about economics. He asserted that people, in this case boards, are willing to pay top-dollar for services essential to their company because there are few individuals with the skill-sets capable of running billion-dollar corporations. This is supply and demand at work. Sowell put it this way: “If people who are capable of being outstanding executives were a dime a dozen, nobody would pay eleven cents a dozen for them.”5

The economic principle of supply and demand does not explain everything, but it explains a lot—even outside the boardroom. It explains, for example, why sanitation workers in the city of New York can earn up to nearly $58,000 after five years on the job when the median salary for a New York City school teacher is $53,000.6 Some might see this as another example of capitalism gone awry. More likely, the supply of teachers is higher than the supply of sanitation workers, putting downward pressure on teachers’ salaries. All else being equal, more people would rather enjoy the rewards of teaching (including summer vacations) than collect trash.

High incomes or disparities between incomes are not necessarily sinful. They may simply result from individuals in a market economy figuring out what they value and how much they are willing to pay for what they value—be it the board members of a Fortune 500 company, the citizens of New York City, or the consumers at a grocery store. When it comes to setting prices, capitalism works wonders. Instead of denouncing CEOs as a category, the Swiss Federation of Churches would have better served their congregations by reminding the world that sin comes from within and greed is a matter of the heart, not the economic system of capitalism. Indeed, greed is a besetting sin of Adam’s race, the rich and the poor. Furthermore, the Federation might well have lifted up the CEOs in prayer, for, as the Bible says, much is required of those to whom much is given. Wealth puts men and women on the spot, where they surely need God’s help.
 
Footnotes:
 
1  Matt Moore, “At Davos, Where Wealth is a Given, A Debate How Much CEOs Should Be Paid,” Business News, January 25, 2007.
 
2  Thomas Sowell, “The ‘Greed’ Fallacy,” National Review Online, January 24, 2007, http://article.nationalreview.com/?q=NTFlNDhmODM3MGY3MTY0Nzg3Zjg2MDE3YjZjNGM1NDQ= (accessed June 5, 2007).
 
3  Ibid.
 
4  Ibid.
 
5  Ibid.
 
6  See Department of Sanitation New York City, http://www.nyc.gov/html/dsny/html/jobs/jobs.shtml (accessed May 23, 2007) and Jay P. Greene and Marcus Winters, “The Teacher Pay Myth,” New York Post, September 22, 2005, http://www.manhattan-institute.org/html/_nypost_teacher_pay_myth.htm (accessed May 23, 2007).
from Kairos Journal

post by First Baptist Church of Perryville, 4800 West Pulaski Highway, Perryville, MD  21903