This week, we consider whether CEOs should take a big bonus even if they don’t intend to pay one to their employees.
We’ll explore perspectives from two seemingly opposed philosophers to guide our thoughts. First, Ayn Rand, a staunch advocate of libertarian principles who champions individual rights and achievements. And then John Rawls, whose commitment to justice, equality, and fairness challenges us to consider the welfare of society's least advantaged.
And now, an introduction to the dilemma.
Hi, I’m Neil.
Thirty-two years ago, I took out a personal loan from my local bank and started my own business. For a couple of years, it was just me. My wife helped with the books in the evening. The business was going pretty well, but I always needed help.
Hiring employees was really scary. Still is sometimes. I was always worried that the business would have a bad year and I wouldn’t be able to pay someone. And I wanted to pay everyone a good wage so they could have a proud living. I don’t view paying good wages as just the business’s responsibility. I view it as my responsibility. I started the business, and it’s a part of me. I take pride in being a small business owner.
We aren’t as small now, though. We expanded a couple of times, and last year, we hired our 42nd team member. The business is doing really well!
This year is a year for celebration. My daughter is graduating from college, and my son is getting married. My wife and I wanted both of our kids to take ownership of their lives, so we told them if they wanted to go to college, they needed to make good money choices and figure out a way to pay for it.
We are really proud of the people they have become, and we want to pay off our daughter’s student loan and send our son and his bride on a Tahiti honeymoon.
We make a comfortable living from what I pay myself out of the business, but we don’t show off. At the same time, my shop supervisor tells me the employees always want better raises.
I want to take a big bonus this year to pay for my kids’ school loan and honeymoon. I should be able to do that, right?
After 32 years of dedication and personal sacrifice, Neil’s question about taking a substantial bonus isn’t about the money. It’s about our duty as individual creators and our responsibility to others.
Ayn Rand and John Rawls are seemingly opposed philosophers who can guide our debate.
Ayn Rand's Objectivism
Ayn Rand (1905-1982) was a Russian-American writer and philosopher best known for developing a philosophical system called Objectivism. She was born in Saint Petersburg, Russia, and moved to the United States in 1926, where she established herself as a screenwriter and novelist.
Rand's philosophy of objectivism concerns reality, reason, ethics, and structure. It strongly supports the idea that we have a moral right to the fruit of our labor. Through this lens, a business owner or CEO’s decisions about compensation are extensions of their personal liberty and responsibility to themselves as individuals. Rand highlighted that:
Man — every man — is an end in himself, not the means to the ends of others. He must exist for his own sake, neither sacrificing himself to others nor sacrificing others to himself. The pursuit of his own rational self-interest and of his own happiness is the highest moral purpose of his life.
Rand (and Random House) published Atlas Shrugged in 1957 to highlight the principles of objectivism. In this fictional work, she explores the world’s creators—innovators, artists, scientists, and industrialists—going on strike against a society that increasingly demands their goods and services while demonizing their success. She argues for the greatness of the individual and the service that individuals provide to society through progress. Society benefits most when individuals can pursue their aspirations without undue interference.
If society benefits when individuals can pursue their interests, acting in one’s rational self-interest is a moral duty to fulfill one's potential. Individual achievements create value and advance human knowledge and civilization. Success and money incentivize individual achievement.
CEOs, business owners, innovators, artists, scientists, and industrialists strive for individual greatness and advance society by doing so. We should not demonize them for their success and the prosperity their success brings.
John Rawls' Theory of Justice
On the other hand, there’s John Rawls.
John Rawls (1921-2002) was an influential American philosopher widely regarded as one of the most important political philosophers of the 20th century. Rawls is best known for his work in political philosophy and his theory of justice as fairness. He pursued an academic career at Harvard University for almost 40 years.
In his great work A Theory of Justice, Rawls outlines two principles of justice. The first is the right to fundamental liberty. The second principle of justice, which he called the Difference Principle, states that the basic structure of society should offer advantages for everyone and that positions of authority or opportunity should be achievable by anyone under conditions of equality of opportunity. To provide advantages for everyone, Rawls advocated that we should structure society to benefit even our least advantaged members.
In other words, we have to work harder to give the disadvantaged a better chance of success.
Rawls argued that while inequality can exist, our structure should benefit society's least advantaged members. This can mean, for example, that higher earnings for CEOs should somehow contribute to better wages or working conditions for lower-level employees. This principle doesn't mean everyone is offered the same choices. Rawls emphasized "fair equality of opportunity," which means we should level the playing field so that individuals from disadvantaged backgrounds have the same opportunity to achieve prosperity as those from more privileged ones.
Practical Implications for Neil
Let’s combine Ayn Rand’s Objectivism and John Rawls' theory of justice to address Neil’s dilemma of taking a big CEO bonus.
Rand’s philosophy would support Neil’s right to claim the CEO bonus as a reward for his contribution to the company's success. As the long-dedicated individual creator, leader, and risk-taker, he has a moral duty to enjoy the fruits of his labor. In Rand’s view, the bonus isn’t simply justified; it’s morally proper for him to claim it. Neil created value that benefits stakeholders by sustaining and growing the business. It would be ethically wrong for Neil to not prosper as a result.
Rawls’ philosophy is more aspirational and challenging. Rawls would emphasize that any economic inequality, like a large bonus for the CEO, needs to benefit the least advantaged members of the company. This doesn’t mean that the CEO shouldn’t take the bonus, but it should be structured so it doesn’t harm others, particularly the most vulnerable. For Neil to justify the bonus, he needs to pay livable wages to all his employees. The bonus shouldn't come at the cost of necessary expenditures to improve employee welfare or job security.
Further, Rawls' philosophy stresses that the conditions allowing Neil to earn the bonus should be part of a fair and transparent system of compensation and advancement available to all employees.
Let’s combine the philosophies. There’s “a” way to look at the bonus through both lenses. Namely, Neil should implement company policies that promote both individual achievement (aligned with Rand’s values) and the well-being of all employees (aligned with Rawls' values). This interpretation could mean ensuring bonuses are part of a structured compensation plan that includes employee performance incentives, promoting a culture of meritocracy and fairness.
But that’s the wrong focus. The decisive effort is not the money, despite how many articles we see about the financial disparity between CEOs and workers. The commonplace worldview might focus on the monetary bonus, but that view is a shortsighted interpretation of Rawls’ philosophy.
Instead, we should consider the bonus through the combined lenses of achievement and opportunity. Neil started the business and put in the work and risk for 32 years. If an employee wants a big CEO bonus, shouldn’t they have the opportunity to do the same thing Neil did?
Rawls’ second principle of justice and equality of opportunity suggests that everyone should have the opportunity to undertake similar risks and start their own ventures. Doing so could potentially earn them similar rewards.
In other words, employees shouldn’t necessarily have the opportunity to receive the same financial bonus. They should have the opportunity to start their own business and work for 30 years, also earning their CEO bonus.
That said, Neil isn’t off the hook. Rawls’ philosophy does require commitment from Neil. He should foster a business environment encouraging his employees to develop entrepreneurial skills. He should provide opportunities for them to lead projects or spin-offs, promoting a competitive innovation mindset within the company. He should offer a merit-based reward system to reward employees who demonstrate long-term investment and risk. Then, other employees also see a pathway to significant achievement based on their contributions.
Neil should go further to achieve the exceedingly high intent of Rawls’ philosophy. When he started his business, he probably had or needed a mentor, so he needs to be one. Neil can help employees acquire the skills and knowledge necessary to excel in their current roles or to prepare for entrepreneurial ventures. Mentorship supports employee individual growth, aligning with Rand’s principles of personal excellence and self-interest.
He might need to consider offering a partnership as a business spinoff to grow his own business. Offering partnership opportunities to employees encourages a sense of ownership and responsibility, advancing innovation and commitment. This initiative exemplifies Rawls' principle of opening up high-reward positions to all capable and interested employees, not just the higher echelons.
Neil needed seed money that he got from a personal loan, but his employees might not have the opportunity to get a personal loan. Providing seed money for rigorously thorough employee business ideas fosters an entrepreneurial spirit within the company, driving innovation and potentially new business opportunities. This action supports Rand’s view that investing in one’s ideas is a pathway to personal and financial success.
Neil should offer assistance with tuition for relevant study programs. By supporting further education, Neil invests in his employees' intellectual and professional growth, benefitting both the employees and the business. Education can lead to more innovative ideas and improved business practices, boosting the company's competitiveness and market position. This effort would further support Rawls' principle of opening up high-reward opportunities to all capable and interested employees.
Neil might also sponsor an employee to start a business spinoff and let other employees move to this partner location, setting them off on the right foot. Employees who feel valued and see clear paths to advancement are more dedicated and motivated. These initiatives help create a company culture where everyone, not just Neil, feels responsible for the business's success.
At first glance, the philosophies of Ayn Rand and John Rawls appear opposed, with Rand championing the sovereign individual and Rawls advocating for a society structured to lift the least advantaged. But they’re not opposed; they’re complementary.
Integrating Rand’s emphasis on individual achievement with Rawls’ focus on equitable social structures yields a holistic approach to address both personal success and societal fairness.
Neil should take the bonus and feel no guilt. He has a moral right to the fruit of his labor. As a society, we should not demonize our creators—innovators, artists, scientists, and industrialists—for their success. Individual achievements create value and advance human knowledge and civilization.
At the same time, Neil should lead initiatives to enable his employees to achieve the same success. To the best of his ability, he is responsible for making sound decisions and paying livable wages while offering long-term stability. He further needs to lead initiatives to enable everyone to have the opportunity to start their own business and work for 30 years, also earning their CEO bonus.
This effort is Neil's big commitment. He needs to be a mentor and partner, potentially offer the opportunity to get seed money, offer tuition assistance for relevant studies, and sponsor partner spinoffs. These are not small commitments.
We spend too much time focusing on society's inequality. We do need to improve wages to help our fellow Americans, especially from our fine working class, but the world always has inequality. Instead, our decisive focus must be tangible approaches to helping the most disadvantaged lift themselves. This is our real commitment to our inherent right to pursue happiness.
May God bless the United States of America.
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