Should leadership compensation be sustained by bailouts?

Should leadership compensation be sustained by bailouts?

 Should board director and C-Suite compensation and shareholder dividends be sustained by government COVID-19 bailouts?

 This is a question regarding values, morals, and ethics not a question of whether or not laws are being broken.

I’ve been reading about many companies receiving large government COVID-19 bailouts while leadership bonuses are paid and even increasing; shareholder dividends are continuing or in some cases increasing. I have read some startup CEOs posting that they have eliminated their personal compensation in order to support the team.

In this time of massive government financial support, should board directors reduce their compensation?  Should C-Suite compensation be reduced?  Should dividends be reduced? Should these savings be redirected to support junior employees or other stakeholders?

Should the leadership and shareholders be suffering a small amount of discomfort while many are unemployed and many small businesses are collapsing?  Should the leadership and shareholders help society and the rest of the team at their companies?

In 1981, the U.S. Business Roundtable published the following:

“Corporations have a responsibility, first of all, to make available to the public quality goods and services at fair prices, thereby earning a profit that attracts investment to continue and enhance the enterprise, provide jobs, and build the economy.” “Business and society have a symbiotic relationship: The long-term viability of the corporation depends upon its responsibility to the society of which it is a part.  The well-being of society also depends upon profitable and responsible business enterprises.”1

 Larry Fink (CEO of Blackrock – with close to $8 trillion of assets under management), in his 2018 letter to CEOs, said “To prosper over time, every company must not only deliver financial performance, but also show how it makes a positive contribution to society. Companies must benefit all of their stakeholders, including shareholders, employees, customers, and the communities in which they operate…..Without a sense of purpose, no company, either public or private, can achieve its full potential…..And ultimately, that company will provide subpar returns to the investors.”

What do you think is the moral and ethical thing to do?

Footnotes:

1 Ralph Gomory and Richard Sylla, “The American Corporation”, April 2013, page 6, The Wall Street Journal http://online.wsj.com/public/resources/documents/50b74ca9c91e6TheAmericanCorporation11292012.doc.pdf

2 https://www.blackrock.com/corporate/investor-relations/2018-larry-fink-ceo-letter

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