What is greed?

A non-management employee does not make the decisions which affect the financial health of the company. One of the problems identified by the G20 was how compensation was calculated, and how those formulae often lead high-level managers to chase risky investments simply because of the potential pay-off to themselves.

From another Globe and Mail article:

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Regulators and the G20 have asked banks around the world to ensure that their pay schemes don't give employees an incentive to take on too much risk. OSFI [Office of the Superintendant of Financial Institutions, a Canadian agency} and a number of other regulators have said that their concern lies in the methods used to determine bonuses, not the amounts.

Simply throwing off comments about the rich doesn't take into account the special responsibilities which the most highly-compensated employees have for the courses taken by their companies, and the consequences of those decisions.

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@Robert Gentel,

...if you look at the numbers concerning mental health evolution maybe you come to recon there is a problem at hand to sort out, from which the economy it is a very large responsible portion...you are addressing "wealth" in a very narrowed compartmentalised sense in here and not looking at the big picture...

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...again as someone already pointed out is about short term commitment with quick profit instead of long term commitment with wealth...its not just about managements and pay-offs its an entire philosophy of bullshitting the next guy...

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@dlowan,

dlowan wrote:

But...if regulation....and I agree re the unknown sweet spot....can help to stop this sort of financial hell hole, ISN'T it also in their best interests?

Preventing this financial crisis is to their interests in the same way as preventing a company from collapsing is within the interests of each employee. And like such a scenario, you'll rarely see individual sacrifice being made for the common good of its own free will.

It is a tragedy of the commons. Each one acting within their own rational self-interest has a conflict of interest with the common good.

Only through such collapse of the common good does it become to their interest, and this common concept governs a lot of overexploitation. Everyone was acting rationally except for the fact that the collective behavior was irrational (but for any one individual to stop does not fix the collective problem and merely introduced the individual problems).

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Yes, I understand your point and also expect them to lobby.....but I think beyond a certain point (and that's a toughie, I agree, where the point is) they are being immoral to do so...or at least unethical. It's not in my individual immediate interest to vote for higher taxing governments, but I do so for a variety of reasons..

I think the point where it becomes unethical is when you know the results would be bad or when you reasonably should have known.

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For them to lobby strongly against what I believe to be mild regulatory proposals just after theyve been bailed out by public money seems to me to be just tacky!

Well, like I said, there is a very strong tendency to view lobbing that one does not agree with as evil or corrupt, or even just tacky. I agree that it is untoward, and in their shoes would probably take a much more conciliatory approach (they are being tone-deaf, but this is stupidity more than a breach of ethics to me). But I view it as a necessary evil. Some proposed responses were things I would have taken to the streets over myself, they need to be fighting for their interests because the pressure they face is not going to stop at the mysterious sweet spot and we count on pressure from both sides as the very mechanism though which to find it.

It's like the criminal justice system, the role of public defenders is not always pretty but necessary. Because justice, like the ideal level of regulation, is not objectively discernable. Therefore it counts on the push/pull process, and pressure from both sides because neither extreme is desirable.

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@Robert Gentel,

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Each one acting within their own rational self-interest has a conflict of interest with the common good.

...it very much depends on how far and on how linearly one looks at it...unfortunately mass stupidity is the main force to fault in this crisis...

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@Setanta,

Setanta wrote:

A non-management employee does not make the decisions which affect the financial health of the company.

If this is the distinction then just put this criteria up to the same test then. Is it unethical for people in a management position to negotiate compensation packages that are not tied to the company's performance? If this is not the particular criterion that you think could extrapolate to other scenarios as a litmus test for greed, then do you have one you would prefer to offer?

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Simply throwing off comments about the rich doesn't take into account the special responsibilities which the most highly-compensated employees have for the courses taken by their companies, and the consequences of those decisions.

I agree that they have decisions of greater consequence and thusly carry greater responsibility. I'm not yet sure if I agree that they have an ethical obligation to negotiate pay that reflects this (I can think of some roundabout ways to argue it myself, but they don't seem very convincing to me).

Do you think it is unethical for them to negotiate a compensation package that does not tie their compensation to their performance when they occupy a position of this kind of responsibility?

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@Fil Albuquerque,

Fil Albuquerque wrote:

...again as someone already pointed out is about short term commitment with quick profit instead of long term commitment with wealth...its not just about managements and pay-offs its an entire philosophy of bullshitting the next guy...

In here the compensations are the trigger and not the gun...identifying the source of this crisis with the compensations model is kind a washed down approach to the entire thing...a technicality who fails to see further in...

I could go further down to say that is not even a problem of lacking moral but simply something as abstract as to much "heat" in the system...to much heat and speed to deal with...and a mass failure to control the huge amounts of resulting entropy.

...the very compulsory urge and need for being successful at all costs results of this...

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@Robert Gentel,

Yes, I see the push/pull thing....but I think it's more than nuance at this point. We'll have to agree to disagree.

You know, the individual/company example interested me, it made me reflect on how different my workplaces are from that. People really DO, generally, give way beyond what the jobs actually require of them. I would imagine they would in your sort of company, too.

I suspect it's less about the people and more about not feeling alienated from the work.

That looks like a digression, but I am thinking that greed in our societies acts so destructively because we are so far separated from the people who experience the consequences and from experiencing any immediate social censure from them.

We really are still wired to live in small groups with immediate social consequences of some sort for bad behaviour!

Digression over.

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@Robert Gentel,

Again, not addressed to me.....but I think it unethical of them to accept bonuses for good performance when they have made bad decisions......

The devil being how to tell what was poor decision making and what part of a drama beyond their control

1 Reply

@dlowan,

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We really are still wired to live in small groups with immediate social consequences of some sort for bad behaviour!

...a "bad mix" in a global abstract scheme of things...hard to trace who is to fault or blame...and where the traditional vertical administration system cannot rule anarchy rules perfectly...

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@Setanta,

I see a direct connection and a parallel that implies greed when it comes to CEO compensation picture. Look at these numbers and tell me something isn't getting greedier and more immoral about the compensation disparity between avg workers and CEOs.

http://money.cnn.com/2011/04/19/news/economy/ceo_pay/index.htm

"CEOs Earn 343 Times More Than Typical Workers"

WASHINGTON (CNNMoney) -- In 2010, chief executives at some of the nation's largest companies earned an average of $11.4 million in total pay -- 343 times more than a typical American worker, according to the AFL-CIO.

"Despite the collapse of the financial market at the hands of executives less than 3 years ago, the disparity between CEO and workers' pay has continued to grow to levels that are simply stunning," said Richard Trumka, AFL-CIO president."

"In an effort to shine a light on CEO pay, the AFL-CIO examined chief executive salaries at 299 firms traded on the S&P 500. Their compensation was up 23% in 2010, compared to 2009. AFL-CIO used Bureau of Labor Statistics wage data to define typical worker pay, which was $33,190 for all occupations in 2009, the most recent year for which data is available.

That and more data is posted on the website paywatch.org, which is run by the union group. The site will eventually post CEO pay for all 500 companies, as that data is released in proxies submitted to the Securities and Exchange Commission (SEC)."

"20 highest-paid CEOs"
The campaign highlighting pay disparity comes as publicly traded companies will soon have to start disclosing the ratio of CEO pay to the median pay of all company employees as part of the Wall Street reform bill. The SEC has yet to implement the new law that will require this disclosure, but it is inviting public comment on the rule, which is expected to be released later this year.

Last month, New York Republican Rep. Nan Hayworth filed a bill to repeal the disclosure rule calling it "burdensome," for placing an "unnecessary logistical and cost burden on all publicly traded companies," in a statement. She said that repealing the disclosure would allow companies to "direct those resources for investment and job creation."

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@dlowan,

oh, look, even Dlowan is apologizing for wandering to supposed digression.

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@Ragman,

...and what does that say about the people who have the money, eh ? most of them know nothing of economy or finances... they will keep paying up CEO´s more, now the argument being to prevent sinking down further...

...again the question is can these small groups of CEO´s pressed up for fast profit, selected for that purpose at starting point, have the kind of power in hands which in the old days belonged to governments ? Can they manage it with a dozen guy´s ? Are they even willing to look at it in the long run when there is no commitment with them in the long run ?
...everything is now measured in the short term...one more guy to be burned quickly...most of them think in getting rich in 10 years and get out for some kind of fantasized utopian paradise in the Bahamas or something like it, with equal bad taste...

1 Reply

@dlowan,

dlowan wrote:

You know, the individual/company example interested me, it made me reflect on how different my workplaces are from that. People really DO, generally, give way beyond what the jobs actually require of them. I would imagine they would in your sort of company, too.

Do you mean effort or money? I think it's pretty common to give effort but not that common to ask for reduced pay for the good of the company.

But yeah, in smaller companies (like mine) that happens (more sacrifice all around, even giving up compensation in a company in my situation, where pretty much everyone has to do it to survive another month), and I do agree with you very much about the size of the society making that kind of prosocial behavior more readily reinforced.

Quote:

That looks like a digression, but I am thinking that greed in our societies acts so destructively because we are so far separated from the people who experience the consequences and from experiencing any immediate social censure from them.

We really are still wired to live in small groups with immediate social consequences of some sort for bad behaviour!

I don't think it's a digression, I think it's a big and important part of all this. In a much larger commons dilemma it is much harder to tell where the line between prosocial consumption and antisocial consumption is and the larger scale introduces additional systemic irrationality. Uncertainty in regard to a resource's availability can dramatically affect consumption rates ("just in case" hoarding) and the consumption habits of others also has further effect on things (the more hoarding behavior there is, the more likely it is for all to behave this way which can turn mere uncertainty into a panic run by all toward the "greedy" consumption).

We can all agree that there is a spectrum of people between those who consume aggressively to those who consume passively and can easily identify this in small-scale communities. But we really do seem ill-equipped to deal with such massive social systems and their regulation.

Drawing the line for what is greedy behavior in a marketplace of two toddlers (competing for food and toys, for example) is easy as hell, but it becomes increasingly difficult to define as you add people. I think this was point was hugely relevant to bring up.

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@Fil Albuquerque,

So what does this say? Can we safely say that one of the symptoms or attributes of greed is the focus on short-term profit regardless of the impact on the long term health of a company or group at large?

Corporate Boards and are geared more so than ever with short-term profits and tweaks that impact the next quarter..ONLY...that is the trend over the last 20-30 yrs. FEd Gov't too.

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@Robert Gentel,

No, i'm not saying it is unethical, what i am saying is that it is irresponsible for the highest level of management (almost always the corporate board) to acquiesce in benefits packages which pay an immediate benefit for "bottom line" increases without consideration of long term effects. Deferred compensation packages which view performance over time and stock option packages are two examples of compensation which doesn't necessarily yield a short term benefit without regard to the long term financial health of the institution. So, for example, if you are relying on the capital gains derived from a stock option package, you would be less likely to make risky decisions which could decrease the value of the stock options you expect to receive. Personally, i take greed as a given, as history affords so few examples of individuals who put aside their personal greed for the benefit of the company. Nikola Tesla saved George Westinghouse's company be foregoing the royalty payments he had contractually secured due to Westinghouse's generosity. Unfortunately, gestures like Tesla's represent the exceptions which prove the rule of individual greed.

Once again, i'm not faulting the individual for negotiating the best compensation package they can get. I'm faulting the coporate boards which allow such negotiated benefits. There is an old boys' club attitude in operation, in that the members of corporate boards are usually themselves holders, or once were, of such contractual benefits packages. I'm not a utopian dreamer, i understand that what i advocate swims upstream of the current of the corporate culture. I'm also no fortune teller to know how the futue of capitalism will be affected by this sort of irresponsible attitude. The failure of Soviet-styule communism has been taken by many to be a justification of capitalism, a confirmation of the superiority of capitalism. However, leaving aside that that ignores the inherent flaws of the Soviet system which had nothing to do with either political or economic ideology, that failure is not evidence of a lack of warts on the face of capitalism.

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I've been mulling. See a lot of sides of this.

Have any of you seen Sebastiano Salgado's photos of goldmine workers?

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@dlowan,

dlowan wrote:

Again, not addressed to me.....but I think it unethical of them to accept bonuses for good performance when they have made bad decisions......

The devil being how to tell what was poor decision making and what part of a drama beyond their control

What if they did great for their company, negotiated very well with the government and got a sweet deal? Some of these companies did just fine, but that too is part of the criticism.

Sometimes the CEOs being criticized were brand new and tying to fix things, they had nothing at all to do with the mess but even then any compensation that was deemed large was vilified.

That being said, I do think it's more noble to refuse bonuses that are undeserved. I'm just not sure, as you say, that it is as simple as it is being characterized or that it is unethical to fail to refuse the bonus (I guess I kinda think it is more ethical to, but not unethical not to). I think that is one of those things few tends to do themselves but many tend to advocate that other people do, I'm just not sure if that is itself unethical because I don't think I'd fault an average Joe for not returning a bonus even if I felt he didn't deserve it.

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@Ragman,

Ragman wrote:

I see a direct connection and a parallel that implies greed when it comes to CEO compensation picture. Look at these numbers and tell me something isn't getting greedier and more immoral about the compensation disparity between avg workers and CEOs.

You keep saying that you aren't trying to establish the greed on the basis of the comparative wealth they have but keep using the comparative wealth to make your case.

As an example, if it is unethical for them to accept compensation packages that are so incongruent with that of others is it also unethical for first worlders to accept compensation that similarly dwarfs that of others?

If having much more than others is the quality that makes it unethical, it would seem to indicate that the entire first world in largely unethical.

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...and who will measure the long term success of a firm when firms and fortunes form up and fall down every 2 years now, or change hands and administrations even faster ?
...there is no long term commitment with nothing these days... its not just management and compensations...no commitment with costumers and the products quality regarding their expected liability and functionality...no commitment with employees and their family´s, no commitment with local social structures...company's have no face, no place in real spaces, today they are virtual entity´s and build up virtual wealth !

1 Reply

What is greed?

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