The Magazine of the Jewish Association for Business Ethics The bonuses and large salaries of senior corporate executives have recently become matters of considerable controversy, exacerbated by the general pressures of the recession and by the sudden instability in the banking sector in particular. There are no specific rules to be found in classic halachic literature about either of these matters, but as always it is possible to distill guidance from Torah sources. The obvious starting point is the mitzvot which prohibit the exploitation of positions of commercial power. In modern parlance in the context of competition law, we talk of the abuse of a dominant market position: that concept is a powerful force in the Jewish commercial code of ethics. The prohibition of "Ona'ah" - overcharging - has no direct application to executives salaries, the halachah expressly recognising that personal services have no exact market value; but it establishes a general principle, that one should not seek to profit more than is generally accepted as reasonable. The problem is that the salaries of senior executives have developed more or less in parallel so that one can say both that there is a roughly observable parity of market practice amongst the leaders of the largest businesses, but also that it does not command general respect or acceptance from those who do not share in it. Amongst the mitzvot about abuse of commercial power are specific prohibitions against exploiting the vulnerable: widows and orphans are singled out in a number of places [see, Exodus 22:22]. The Torah does not content itself with prohibiting their oppression, but describes the consequences of failure to protect in emotive terms: "when they cry to me I will certainly hear their cry, my anger will be aroused and I will destroy you and reduce your own wives to widowhood and your children to orphans". The Torah is dealing here with general oppression of a kind that breaches no laws and therefore cannot be resolved by a court. But it still results in injustice and, says the Torah, we should remember that what the courts cannot deal with, God will, in His own inscrutable way. Social commentators from Dickens and Trollope onwards have noted how the expansion of commercial opportunity through the development of corporate institutions has delivered the financial fortunes of widows and orphans into the hands of the large financiers, whose success and failure determine those of their millions of clients, nowadays through the unavoidable complexities of unit trusts and pension funds. Entrepreneurs in charge of large funds and businesses should remember their social responsibility. It could be argued that a commercial climate that appears to reward failure, or at least omits to punish it, by allowing large bonuses for executives who preside over corporate disasters that ruin the most vulnerable of their clients, creates the very injustice against which the Torah protests, and of the potential consequences of which it warns in such graphic terms. This article was prepared with the assistance of Daniel Greenberg, Barrister and JABE Consultant Jewish Concepts - Ona’ah “When you make a sale to your fellow or make a purchase from the hand of your fellow, do not aggrieve one another.” [Leviticus 25:14]. With this verse, the Torah forbids a seller to overcharge and a buyer to underpay in the course of a business transaction. This is known as the prohibition of ona’ah, taking advantage. The Gemara (Bava Metziah 61a) compares the prohibition of ona’ah to outright stealing, for in both cases a person is taking money or possessions that are not rightfully theirs. Corporate Bonuses Summer 2009
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The Magazine of the Jewish Association for Business Ethics
The bonuses and large salaries
of senior corporate executives
have recently become matters of
considerable controversy,
exacerbated by the general
pressures of the recession and
by the sudden instability in the
banking sector in particular.
There are no specific rules to be
found in classic halachic
literature about either of these
matters, but as always it is
possible to distill guidance from
Torah sources.
The obvious starting point is the
mitzvot which prohibit the exploitation
of positions of commercial power. In
modern parlance in the context of
competition law, we talk of the abuse
of a dominant market position: that
concept is a powerful force in the
Jewish commercial code of ethics.
The prohibition of "Ona'ah" -
overcharging - has no direct
application to executives salaries, the
halachah expressly recognising that
personal services have no exact
market value; but it establishes a
general principle, that one should not
seek to profit more than is generally
accepted as reasonable. The
problem is that the salaries of senior
executives have developed more or
less in parallel so that one can say
both that there is a roughly
observable parity of market practice
amongst the leaders of the largest
businesses, but also that it does not
command general respect or
acceptance from those who do not
share in it.
Amongst the mitzvot about abuse of
commercial power are specific
prohibitions against exploiting the
vulnerable: widows and orphans are
singled out in a number of places
[see, Exodus 22:22]. The Torah does
not content itself with prohibiting their
oppression, but describes the
consequences of failure to protect in
emotive terms: "when they cry to me
I will certainly hear their cry, my anger
will be aroused and I will destroy you
and reduce your own wives to
widowhood and your children to
orphans". The Torah is dealing here
with general oppression of a kind that
breaches no laws and therefore
cannot be resolved by a court. But it
still results in injustice and, says the
Torah, we should remember that what
the courts cannot deal with, God will,
in His own inscrutable way.
Social commentators from Dickens
and Trollope onwards have noted
how the expansion of commercial
opportunity through the development
of corporate institutions has delivered
the financial fortunes of widows and
orphans into the hands of the large
financiers, whose success and failure
determine those of their millions of
clients, nowadays through the
unavoidable complexities of unit
trusts and pension funds.
Entrepreneurs in charge of large
funds and businesses should
remember their social responsibility. It
could be argued that a commercial
climate that appears to reward failure,
or at least omits to punish it, by
allowing large bonuses for executives
who preside over corporate disasters
that ruin the most vulnerable of their
clients, creates the very injustice
against which the Torah protests, and
of the potential consequences of
which it warns in such graphic terms.
This article was prepared with the
assistance of Daniel Greenberg, Barrister
and JABE Consultant
Jewish Concepts - Ona’ah“When you make a sale to your