NHL players recently agreed to a salary roll back of 24% to get back to
'work'. However shareholders of CIBC were not consulted for their approval
to pay 2.4 billion dollars to settle claims stemming from its (alleged)
involvement in the Enron fraud. At the same time CIBC was doling out
millions of dollars in bonuses to the CEO and executive team - a team that
ended up costing the bank more than an entire year's worth of profits.
Should investors be entitled to recover these bonuses and perhaps even
salaries from those responsible for such shocking ethical lapses?
Unlike the corporate world which is bottom line oriented Jewish ethics is
predominately centered on intent. Results are ultimately in the hand of G-d
and thus ethically it is our effort that counts most. Therefore an advisor
who, because of a higher commission, gives inappropriate investment advice
for a particular individual violates Jewish ethical cannon even if the
investment doubles in six months. Yet an advisor who gives what he believes
to be appropriate advice that turns sour is beyond reproach, notwithstanding
the howls of protest from the innocent investor. Thus a CEO who makes an
investment decision with the best interests of the company in mind bears no
financial burden even if that investment costs the company millions of
dollars. Who should have authority for such decisions is less an ethical
question than a practical one.
However, if lawful investment decisions are made for reasons other than the
best interests of the stakeholders involved a grievous ethical wrong has
been committed regardless of the ultimate outcome. As we humans are unable
to truly establish the intent - that is for G-d - Jewish courts can only
deal with actual wrongs committed. While it may be immoral, it is not
illegal to have ulterior motives. However income earned in an underhanded
way would be subject to claw-back. Thus a bonus paid based on profits that
then turn out to be non existent should be subject to repayment. Therefore
any bonuses - cash or stock - paid to executives responsible for the Enron
debacle should definitely be returned to the company.
The appropriate resolution is less clear in regard to salaries earned during
this time. While many find the salaries paid to bank executives to be
excessive in the extreme, they in of themselves, do not raise ethical
issues. Jewish ethics regulates the manner in which money may be earned but
not the amount that is earned. In the private sector it is market forces
that determine salaries - and excessive salaries allow the ethical executive
to give "excessive" amounts for charitable purposes. High salaries may not
come at the expense of paying workers a fair wage and common sense dictates
that wages be set up in such a way that promotes corporate harmony.
Jewish law distinguishes between employees and contractors, asserting that
employees are paid for their time on the job and not for their work per se.
Of course the better their work the more valuable their time becomes. Thus
while incompetence may allow one to fire a worker it does not allow one to
withhold pay. In practice negligence may not be grounds for withholding
pay. It is only salaries earned fraudulently, it appears to me, that would
be subject to repayment. This would include time spent on illegal or even
activities that contradicted their given mandate. Thus whether the CIBC
executives should be forced to return their salaries depends on whether
their activities can be shown to cross the line from incompetence to