Business principles and unseemly behavior

The AIG bonuses widely viewed as unjustified are a symptom of a much larger and older problem, that of unreasonable executive compensation.

Assuming limits on executive compensation cannot be legislated, one way to encourage such limits is for government and/or business leaders to set "voluntary" principles by which ethical and responsible companies should operate, akin to the "Sullivan principles" adopted by companies doing business in apartheid South Africa a generation ago. These new business principles could include maximum CEO compensation that is no more than a specific multiple of the lowest or average paid worker at that company (as Ben & Jerry's Ice Cream did for many years). Linking pay to long-term, rather than short-term, company performance also could be emphasized.

Companies could be given the right to use a copyrighted logo tied to the principles in their marketing so that consumers could identify them as adhering companies. If consumers, other businesses and government gave strong preference to companies adhering to these principles in their buying and contracting behavior, the principles could be widely adopted, reining in excessive executive compensation as well as other practices deemed unseemly if legal.

 

KEN PERKINS
Squirrel Hill