Executive pay: freedom or provocation?

As a part of its brochure series “10 Questions – 10 Answers” the Federation of Swiss Protestant Churches responds to the Swiss popular initiative “against rip-offs” and the indirect counterproposal.

Reformed Christians are opposed to greed and the boundless, unjustified amassing of financial gain. Also, corporate business must give low-income workers the chance to make a living wage. This is the position taken by the Federation of Swiss Protestant Churches in its brochure “Executive Pay: Freedom or Provocation?”, which was published today. In ten questions and answers, the FSPC expresses its position in the debate surrounding the Swiss popular initiative “against rip-offs.”

The debate has been sparked by the skyrocketing salaries of many corporate executives. Social cohesion is at risk “if excessive executive pay is considered an intolerable provocation by large parts of the population,” the FSPC explains in the brochure.

Corporate salaries are a matter of freedom of contract. However: “Freedom without responsibility is impossible. Freedom without consideration for others destroys itself.” The recent skyrocketing of executive pay cannot be justified with the principle of performance-based distribution, the FSPC states, and “the principle of needs-based distribution also suffers.”

The FSPC repeats its own demand, issued some years ago, to cap the pay of top executives in relation to the company’s lowest-paid employees. An adequate pay ratio is based on values that were common in many industrialized countries up until the 1980s. For top executives and supervisory board members, a maximum ratio of 1-40 seems reasonable. A lower ratio should be aimed for if average salaries of executives and supervisory board members are put in relation.

The FSPC acknowledges that the initiative itself addresses fundamental ethical matters, but doubts its efficacy to bring about more freedom or social justice due to its “very high density of regulations.” Singling out the greed of individuals as the only problem is an oversimplification, the FSPC explains: “What we need is an overall fair distribution of income, resources and wealth.” However, distributive justice does not seem to be the goal of either the initiative or the counterproposal.

In the FSPC’s view, this is the “weakness of the current debate about rip-offs and corporate greed.” Instead, the FSPC states, the framework conditions of business must be addressed. The financial system must be protected and developed as a global public good. Further demands include international tax justice and sustainability criteria for public spending. “It is a serious concern that the fight against rip-offs diverts attention from these big, crucial issues,“ the FSPC brochure concludes.