The Worker and His Due

In honor of today's feast of St. Joseph the Worker, I thought I'd touch for a moment on workers, owners, profits and justice. Fr. Martin Fox stirred up a bit of an ants nest on Friday by commenting on the recent flap about oil company profits -- and the attempts of various politicians to capitalize on the flap by limiting oil company profits.

The source of the flap is, of course, that the retiring CEO of Exxon-Mobile received a retirement package worth 400 million dollars, while at the same time people are paying high prices at the pump. The 400 million is, I believe, a mixture of stock and cash and will be paid out over a period of years, however comparing it to the 2005 Exxon-Mobile gross revenues is still interesting. In 2005 Exxon-Mobile reporting 371 billion in gross revenue. The CEO's parachute equals 0.11% of this figure.

Now, a few years back I worked for a 25-employee, family-owned chemical distribution company. The company had about 25 million in annual sales, however since it mostly served as a sales agency (collected commission rather than buying and reselling product) with an average commission of 10%, it was in many ways more like a 2.5 million annual revenue company. Now, out of that 2.5 million in revenue coming into the company, about 1 million went to the founder, his son (current president), the COO, the controller and the top salesman, all of whom made 100-250k per year. The other 20 employees made 25-50k/year. The 300k that the company president took home every year represented more than 10% of the total revenues coming into the company.

I think if you took a look at a lot of small, privately owned businesses, you would find the same pattern. The owner often absorbs a large percentage of the total wages paid out. Sometimes, this is simply a case of the owner paying himself more because he can, but often in 5-30 person companies the owner is both responsible for a disproportionate percentage of the work, and also of the risk. If a corporate CEO's company goes bankrupt, he just goes looking for another job, but if a small business owner's company goes bankrupt, that can often mean bankruptcy for him and his family as well.

In additional to this personal risk factor for small company owners, the comparatively small dollar amounts involved keep them from looking quite as greedy as corporate CEOs. If the owner of a liquor store makes 75k/yr, while his four employees each make $12/hr, the employees may resent his nice clothes and Lexus, but the wider society will recognize that he's still making less than a lot of accountants and lawyers, who face far less personal financial exposure in their work.

The difficulty with big business is that, although the actual percentage of gross revenue which goes to paying key executives is actually lower than in a small business, there's simply so much money involved. We see this with the occasional outrage over the salaries of professional sports players. Clearly, a lot of people in this country would be ecstatic to make a middle class income of 60-75k a year to 'have fun' playing sports and being famous. Why, then, we sometimes ask, do professional athletes demand multi-million dollar contracts? The answer isn't so much that they wouldn't want to play for less, in the objective sense, but rather that they are clearly producing so much wealth, and want a piece of it. Say that between ticket sales, television, endorsements and such, a sports team is generating 250 million in annual gross revenue. Now, while the players might (in the absence of all this money flying around) be perfectly happy to play for an average middle-class income, knowing that the team owners are raking in 250 million based on what the players are doing understandably makes the players want to have a bigger piece of the action. After all, without the players there would be no income.

If a few top executives at a company really are making a very large personal contribution to the decisions which make the company a big revenue earner, then I don't think there's an inherent injustice in allowing those executives to make a lot of money. However, with money comes responsibility. Speaking as a Catholic, I don't think the moral issue is so much that you shouldn't make too much, as that 'from those to whom much is given, much is expected'. Christ repeatedly condemned people who simply liked to sit on a large pile of gold, dragon-like.

Also important, as a matter of justice, is whether a high-paid owner or executive is 'stealing' his high salary from the workers. This is often a hard thing to measure, since a mid level worker at a 1000 employee company may think, "How can an executive possibly be doing better work than I am, yet he makes ten times as much." Certain cases seem clear. If a business owner or executive has numerous employees making far less than similar-skilled workers in the industry, while he himself is pulling down a record salary, some sort of injustice seems to be at work. If, on the other hand, the company's workers are generally making average or above-average wages for their industry and skills, than high executive compensation may justly reflect key executive performance.

The other party, sometimes forgotten in all this, is the just return for the investors. Large companies cannot operate without large amounts of capital, and it is the stockholders who provide them with that capital. Thus, the stockholders perform an essential function in a publicly held company, and so they should justly receive a fair return on their investment (if the company is otherwise profitable) rather than the executives reducing profit by paying out all available funds into salary (a form of expense that decreases profits).