not.74
To decide differently makes for a mismatch. Superior quality flutes are wasted on maladroit players. Interestingly, such a principle can be readily applied to the business world. A firm considering who'll get promoted to senior vice president, will query: Which of our candidates holds promise to be the most excellent for this role, adding maximum value to our enterprise? But notice that here the locution “maximum value,” does not signify “maximum profit-maker.” After all, profits are not the goal of life. Rather profit is merely a means to attaining happiness and the good life, which is constituted through virtuosity—that is, virtuous business conduct. We shall examine the connection between profit generation and virtue in greater detail in Chapter 3 (“The Art of Business”).
Aristotle's take on this suggests that company heads ought to allocate benefits, bonuses, job advancements, raises, and the like, not simply along lines calculated to achieve maximization of profit, but as a way of rewarding and incentivizing virtuous behavior.
Aristotle's overarching regard is for the welfare of the whole community. Aristotle does not want to posit a natural human pecking order as a rationale for prizing the genetically endowed at the top. Nor is he seeking to lighten the load for the well-off. To the contrary: people having the greater abilities ought to be released from the more menial tasks in order to focus on things that maximize their capabilities and the social gains they may bring about. Those atop the ladder shoulder responsibility for assisting those on the lower rungs. By doing that, all are elevated from the presence of inequalities rooted in genuine abilities and aimed toward economic betterment.
To turn to a contemporary illustration, we might ask why Steve Jobs, founder, chairman, and CEO of Apple, ought to be the one rendering executive decisions at the company. The answer is not that he has some natural right to be in charge, or that he is “a productive narcissist.”75 Rather, it is to everyone's advantage, across the organization, that the best talent be placed at the summit. After all, who in their right mind would sign on at Apple if the firm's guiding mission was a commitment to uncompromising equality, mandating that those appointed to the firm's top-tier executive squad be mentally challenged workers selected from the cleaning crew, leaving Steve Jobs to be the elevator operator?
While taking an Aristotelian virtue perspective is not likely, by itself, to provide a comprehensive solution to the executive compensation imbroglio; doing so at least suggests some questions that virtuoso leaders would want to pose to themselves, questions that point in a much different direction than the one indicated by the sort of conventional economic analysis described earlier: Is my remuneration commensurate with my contribution to the firm? Is the current allocation of goods within our firm helping to foster the happiness of the community our firm makes up, or is it actually dampening morale and inhibiting other people from attaining happiness?
Moreover, an Aristotelian outlook implies that in assessing the conventional pay-for-performance paradigm, we ought to distinguish between, on the one hand, high financial rewards for “performance” in firms and, on the other hand, the value creation arising from the firms' activities. For instance, it has been argued that an aggressive quest for profits in banks and other financial institutions has been value destroying, not only for the institutions themselves, but ultimately for society and human welfare, as manifested in the financial crisis.
Indeed, it is arguable that the costs and externalities associated with a given profession's activities should be deducted in calculating that profession's Social Return on Investment (SROI) contribution, a la the New Economic Forum's approach.76 Looking at broader indicia such as SROI prompts the question: Why on earth are executives working in certain sectors, such as banking and financial services, the privileged recipients of such extraordinary rewards?
On a wider account of wealth creation—particularly in light of the concerns voiced by Aristotle with regard to the proper and improper ends of money—such as his “money from money” critique cited earlier in this chapter,77 it could be asserted within the spirit of this criticism that, even in the course of favorable economic periods, banks (to name but one financial institution), in the course of taking deposits, transmitting and clearing payments, and bringing investors and savers together with users of capital and borrowers, play merely a secondary role as facilitators for the primary economic participants who render more direct and pronounced contributions to society. So why are bankers the object of “hero worship,” and why did the attitude emerge that treats bankers “as masters rather than servants of the economy”?78 Arguably, it is in carrying out this secondary role that banks negligently overreached by overleveraging deposits in risky bids for ever greater profits, thereby destroying, rather than creating, value. Strangely, even in the midst of a massive credit crunch, created by their own calamities, banks were roundly refusing credit to what would have earlier been deemed viable business propositions.79
Turning to a question raised earlier concerning the personal motivation behind those in hot pursuit of attaining excessive executive compensation, lurking in the background is the specter of homo economicus, the lowest common denominator of human motivation. One writer, reflecting on the matter in the context of the banking industry, questions the wisdom of lavishing so much reward on the business activities of people who depend on “technology to present infinitesimal arbitrage opportunities around the world—which, when aggregated over very large leveraged balance sheets, create massive profits…. A growing undercurrent suggests that in fact these are not terribly useful economic activities…. This system also reinforces money—not values, strategy, culture, or the quality of the institution—as the only reason to work at a bank.”80
Much of the current thinking about pay for performance is devoid of consideration of the sorts of values that emerge from adopting a virtue-regarding outlook. For example, there is little reflection on the character dimension of individuals who appear to be greedy beyond any limits or controls to accumulate as much money as possible.
It is in light of this void that Aristotle's thought affords a wider and deeper philosophical outlook. For instance, using an Aristotelian lens to look at the significant layouts of funds that typify the “reward me big-time” culture of many corporate executives, there is a peculiar sort of virtue to examine: magnificence. According to Aristotle, what makes you a magnificent person is having the good taste to divert big money appropriately and to advance a laudable end. In stark contrast to a vulgar kind of individual, you are magnificent if you are not being gaudy. That is, you are not showing off your affluence by spending more than circumstances warrant.
The man who goes to excess and is vulgar exceeds…by spending beyond what is right. For on small objects of expenditure he spends much and displays a tasteless showiness; e.g. he gives a club dinner on the scale of a wedding banquet…. And all such things he will do not for honour's sake but to show off his wealth, and because he thinks he is admired for these things, and where he ought to spend much he spends little and where little, much.81
We can perhaps find no better illustration of what Aristotle is talking about by way of vulgarity through tasteless excess than to recall Dennis Kozlowski, the Tyco International CEO who fell from grace due to a string of malfeasances associated with his receipt of unauthorized bonuses and his misappropriation of corporate assets. In the course of his criminal trial we all learned about the details of the US$2 million, weeklong birthday bash (known as the “Tyco Roman Orgy”) for his second wife on the island of Sardinia, complete with dancing nymphs, models dressed as gladiators and Roman servants, a performance by singer Jimmy Buffett and his group (flown in to the tune of US$250,000), a birthday cake in the shape of a woman's body with sparklers protruding from her breasts, and an ice sculpture imitation of Michelangelo's statue of David urinating Stolichnaya Vodka. Kozlowski also was noted for leading an extravagant lifestyle supported by the booming stock market of the latter 1990s and early 2000s. Purportedly, he had arranged to have Tyco shoulder the cost of his US$30 million Manhattan apartment on Fifth Avenue,
