Topic: Business & Commercial Fairness and the 100 Million Dollar Man (8/30/2009)
What is fair? That is the question
raised by the dilemma of Andrew Hall, a Citigroup commodities trader who
has earned, according to the terms of his completely legal and valid contract,
100 million dollars. Citigroup, of course, was bailed out by taxpayer
funds to the tune of $45 billion dollars. Is it fair for 100 million dollars
of this money, supposedly intended to keep the financial institution from
collapsing, to go to one man? One man gets all this, while regular citizens
are struggling to keep their homes? It is the AIG bonuses all over again!
An outrage! Well, thats one way of looking
at it. Another way is this: Hall undeniably earned his money. His trading
judgement has been a factor in earning Citi an estimated 2 billion dollars
over the last five years, according to the New York Times. If they dont
pay him what hes worth, another company, not burdened by the political
fall-out from bailout funds, will be happy to do so. Without Mr. Hall,
Citigroup will be less likely to be able to pay back all those taxpayer
funds. From an ethical standpoint, this
is, or should be, an easy call. Hall made a deal to sell his services.
He is spectacularly successful at his craft, and it is widely believed
that he is a unique talent, just like baseball players such as Alex Rodriguez
or Mark Teixeira, who make more than 20 million in six months of playing
a game and who dont return anything close to the profit margins Hall
does. He absolutely deserves the money he earned, bailout or no bailout,
taxpayer outrage or not. Still, there are many Americans
who cannot accept that there isnt something intrinsically wrong about
Hall, or anyone, making 100 million dollars. In their view, for one person
to make that much money is, by definition, unfair. If he would be paid
just one million dollars, enough to be called rich by most definitions,
think of all the good that could be done with the remaining money: hungry
children fed, families housed, sick people cured. That attitude leads to a problem,
however, in a country founded on the principle of individual freedom and
self-determination. It suggests that people should not be permitted to
sell their talents and services for what they are worth—a core right
of a free citizen— and there is no question that Hall is worth every
dollar he is paid for two reasons: 1) A corporations which needs to turn
a profit is willing to pay him that immense amount, and 2) he earned that
corporation much more than he is paid. Whatever the culture may have concluded
in other nations, in this nation we still embrace the idea that there
is no such thing as earning too much money, if you work for it and can
convince someone to pay it. If the majority can declare that 100 million
dollars is too much, it can decree that $100,000 is too much, or $50,000,
or $10,000. This is a version of fairness that not only leads to an
unfair result, it also stifles enterprise, ambition, and trust. In short,
it doesnt work. Halls dilemma is the direct result
of government action (however necessary or wise) that undermines the principles
of free enterprise, which include the freedom of unsuccessful businesses
to fail. Hall had nothing to do with any of that, however. It is true
that if Citigroup had gone belly-up, he would have had a hard time collecting
the bonus he earned, and that would have been unfair too. But when the
U.S. Treasury stepped in to bail-out Citicorp, it permitted the company
to meet its contractual commitments. If the government didnt want Andrew
Hall to get the money he had earned, it should have let Citicorp go belly-up.
In light of these extraordinary
circumstances, would it be ethical for Hall to accept less than the amount
due him, as some of the AIG executives did in the wake of the public uproar
over their bonuses? Of course it would. Nonetheless, he has no ethical
obligation to give Citigroup a discount on the compensation that was agreed
upon, especially after he delivered splendidly on duties, any more than
it is your obligation to accept a reduction in pay when your company,
due to no fault of yours, finds itself in dire straits. You may choose
to do that; I have, in fact. But thats affirmatively ethical conduct
that goes beyond obligation. It isnt unethical to take what is
owed to you. This is not the same situation
as the highly paid CEO of a corporation who, having contributed to his
companys financial distress by making poor decisions, nonetheless continues
to take the full extent of his salary while he eliminates large numbers
of the lower paid workforce who simply been doing their jobs. This is,
I believe, unfair and a failure of accountability and loyalty, but that
description doesnt apply to Hall. Hall isnt management; hes a hired
gun. If everyone in Citigroup had done their job as well as he did his,
it wouldnt have needed a government bailout. Its fair to be angry at Citigroup, and it is fair to be angry with the government. But not Andrew Hall. He is owed a lot of money, but he earned it, and it is wrong to deny it to him. Fair is fair.
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© 2007 Jack Marshall & ProEthics,
Ltd |