Admin's note: With the current attention that executive salaries are receiving, not least in the wake of the large layoffs last week at Pacific Brands, we are re-running a post from last November by David Wishart, dealing with this issue.
The best frauds are those that are legal. You cannot get caught for them.
By ‘fraud’ I mean here illegitimate gain or reward, preferably huge. ‘Illegitimate’ means without moral justification. By now you will know what I am talking about. That says a lot in itself. But just to be absolutely clear, this essay is about excessive rewards for corporate officials.
What is said to justify rewards worth millions of dollars? Four justifications are commonly deployed. These are: the reward is deserved, that shareholders have consented to it, it is compensation for risk-taking, and that the market sets the price. Looking at each in turn, as I do below, none is persuasive. Hence I would argue that high rewards for corporate officials are illegitimate and a fraud on society.
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