A latter-day saint’s perspective on leadership compensation

Note: non-lds readers can jump down to here to skip the Book of Mormon preliminaries.

We hear in the church often that the Book of Mormon was written for our day. Let’s see what lessons we can pick up about compensation for leadership.

Leadership Types

Two of the most famous kings of the Book of Mormon, if not the most famous kings, are King Noah and King Benjamin. These two kings lived at the same time in a similar place yet represent opposite ends of a spectrum of leadership.

King Noah saw his position as one of power and authority. He laid taxes on the people to satisfy his greed and selfish lusts. He replaced all of his fathers advisors (“priests”) with people of a similar mind to his own who would appeal to his pride and conceit, and who in turn were also supported by the taxes of the people. Through word, example, and leadership, they taught the people to follow the same selfish pursuits. Despite all this, they believed they were righteous according to the Law of God. (Mosiah 11)

King Benjamin saw his position as one of service. He didn’t throw people in jail or tax the people for his own gain. In fact, while exercising his kingly duties he worked for his own support. He taught the people compassion for all; he didn’t consider himself to be any better than any of his people. Through his words, example, and leadership, he taught his people to be united and Christlike. (Mosiah 2)

The following chart illustrates this spectrum. Any contemporary leader can be placed somewhere along this spectrum.

Spectrum of Leadership

Spectrum of Leadership

What kinds of leaders should we aspire to be? The scriptures make clear that we should be righteous leaders who sincerely desire to serve and do not have our hearts set on the things of this world (see, e.g., D&C 121:34-35). We should be like King Benjamin.

What kinds of leaders should we try to have? We should seek leaders as close as possible to King Benjamin’s example, for the leaders we select will directly influence the righteousness or wickedness of the people they serve – or rule (Mosiah 29:33-35). We should seek and support leaders who are like King Benjamin.

What kinds of leaders does this apply to? King Benjamin made clear that this applies to everyone:

Behold, I say unto you that because I said unto you that I had spent my days in your service, I do not desire to boast, for I have only been in the service of God. And behold, I tell you these things that ye may learn wisdom; that ye may learn that when ye are in the service of your fellow beings ye are only in the service of your God. Behold, ye have called me your king; and if I, whom ye call your king, do labor to serve you, then ought not ye to labor to serve one another?

(Mosiah 2:16-18)

This spectrum applies to civil leaders, business owners, corporate directors and shareholders, underemployed laborers, fathers, mothers, etc.

Leader Compensation

Though there are many worthwhile lessons to be learned from comparing and contrasting King Noah and King Benjamin (e.g., they both were of the same religion and believed themselves to be righteous), I’m going to hone in on compensation for their leadership. King Noah used his position to gain significant wealth with which he could live lavishly and handsomely reward his friends. King Benjamin apparently received nothing.

In the Federalist Papers no. 73, Alexander Hamilton stated that the President should have a salary provided by the people and unchangeable for the duration of office in order to keep her/him free from political pressure from the legislature. “They can neither weaken his fortitude by operating on his necessities, nor corrupt his integrity by appealing to his avarice.” These justifications appear to have been extended to many governmental positions, both elected and appointed, and may have influenced private practice as well. Let us examine these two supporting claims under the light of Latter-Day Saint doctrines and 200+ years of experience.

Should leaders receive enough pay that they need not be concerned about their welfare?

The example of King Benjamin is used as a template within wards and stakes throughout the church – they do not receive any kind of financial compensation for their time. They work outside of their responsibilities for their own support, just like everyone else. (Note, too, that when a bishop’s family is in need, they can receive support from the church Fast Offerings fund just like any other member of the church, though it has to be approved by the stake president).

King Mosiah, the son of King Benjamin and a righteous and well-loved leader, proposed abolishing the monarchy in favor of a system of judges ruled by the voice of the people. Unlike King Benjamin, these judges (and apparently other government officers) were compensated for their time with funds equivalent to “a measure of barley” per day (Alma 11:3,7).

As I may have mentioned before, I find it significant that a disproportionate amount of effort is made in covering this period of the Book of Mormon. Though it lasted only 12% of the Book of Mormon by time (excluding the Jaredite history), it makes up 44% of the Book of Mormon by word count. I do not believe this to be a coincidence, particularly considering the similarities between the government during the reign of the judges and our own. We would be wise to learn from it.

In light of this, the Book of Mormon appears to support a modest pay for supporting the needs of our civic leaders. However, it is also important to note that the Book of Mormon provides a cautionary tale against paying leaders according to their time. In at least one city, the lawyers and judges intentionally created conflicts among the people so that they could mediate them in court and get more work – and hence more pay (see Alma 11). The framers of the constitution were wise to require fixed and unalterable salaries. Perhaps awarding fixed salaries proportional to expected time commitments would be an ideal approach.

Should leaders receive enough pay that they will be immune to bribery?

Although Hamilton was referring to the unchangeable nature of the presidential salary rather than the amount, it seems that the interpretation was that the president should receive a rather large salary (initially 5 times more than the vice president and many times more than the average worker). The last 200 years make clear that this argument vastly underestimates the power of comparative wealth. According to retired CEO Edgar S. Woolard, Jr., CEOs negotiate their salaries based on peer standing, not need or insurance against bribery. There does not appear to be an upper limit on the amount of pay that would be required to protect against “appeal to [a person's] avarice”.

According to the scriptures, how would a leader be portrayed who used her/his followers to provide for her/his own material comfort? Or a leader who feasted while his followers starved? I hope it is clear that such a leader would be universally condemned. A true leader will “mourn with those that mourn; yea, and comfort those that stand in need of comfort” (Mosiah 18:9), as should we all.

Christ repeatedly taught that leaders should not place themselves above their followers. One of the most dramatic instances was at the last supper, when he washed the feet of his disciples. He explained,

Ye call me Master and Lord: and ye say well; for so I am. If I then, your Lord and Master, have washed your feet; ye also ought to wash one another’s feet. For I have given you an example, that ye should do as I have done to you. Verily, verily, I say unto you, The servant is not greater than his lord; neither he that is sent greater than he that sent him. If ye know these things, happy are ye if ye do them.

(John 13:13-17)

Similarly,

Verily I say unto you, That a rich man shall hardly enter into the kingdom of heaven. And again I say unto you, It is easier for a camel to go through the eye of a needle, than for a rich man to enter into the kingdom of God.

(Matthew 19:23-24)

Who is rich? One who has more than most others.

Yet again,

If any man will sue thee at the law, and take away thy coat, let him have thy cloke also. And whosoever shall compel thee to go a mile, go with him twain. Give to him that asketh thee, and from him that would borrow of thee turn not thou away.

(Matthew 5:40-42 and repeated in 3 Nephi 22:40-42)

The ideal compensation is clearly one which is at least very close to the King Benjamin side of the scale.

Government Pay

Having leaders who are significantly wealthier than the people they serve reinforces a division between them. It creates an aristocracy of sorts which the framers of the constitution were explicitly striving to avoid. What becomes important to the leader are not the same things as those which are important to their followers. It is a disservice both to the leader and their followers to create such a division.

A few months ago, Fox News published an inflammatory article expressing outrage at $199,700 salaries paid to some government workers and bonuses of up to $62,895 paid to many. I agree. Their outrage was based on a comparison with the private sector. Here, I disagree. It is most definitely on the King Noah side (i.e. condemnable) for government workers to receive more than their needs and more than the people they serve and who provide their wages and support. Government wages should not be tied to private sector comparisons but to the median income of the full-time workers that support them (with a modest increase to compensate for necessary educational debt above the national average, if present). In the United States that’s currently $42,431 (for 2011). If that’s not enough for them to live on, then we need to increase the median income!

How do we increase the median income? Some might suggest that we increase the GDP per capita. However, as history has shown and as I’ve already discussed on this blog, the vast majority of new wealth goes to those who already have it. Despite ever-increasing gains in GDP per-capita, the median worker income has been stagnant since 1970. Increasing the GDP does not significantly affect the median income. On the other hand, if income were more equitably distributed, the median full-time worker would earn up to 1/3 more ($57,064 in 2011). This leads me to the next point.

Government Involvement in Private Sector Pay

Since the 1980s, privatization of government services has been touted as a great cost-saving technique under the belief that the private sector is more efficient than the public sector (due primarily to competition on the free market). Though studies have found that this concept is not universally true (search scholar.google.com for “government privatization”), I want to focus on something that is clear about government use of the private sector: the benefits of outsourcing government responsibilities to private companies disproportionally favors the wealthy.

To see how this works, I have examined the top ten contractors hired by the federal government (an easy target as so much data is available). These companies received anywhere from 14% to 91% of their income from the U.S. government and account for about 20% of the total federal spending on contractors. Taking the amount each receives from the government into account, the U.S. government paid each CEO up to $17.7 million dollars in salary and bonuses in 2011. That’s more in one year than the typical American could earn working full time for 400 years. If $200,000 salaries and $68,000 bonuses are outrageous, this is beyond words.

But wait – this is just the beginning! CEO pay is itself a nice distractor from the fact that each of these companies are publicly traded and that 8 of the top 10 give dividends to shareholders. Here’s where it gets real interesting. The SEC requires shareholders to file only if they own 5% or more of a company’s stock. Anything less than that is invisible to the public eye – we have no idea where that money is going; whether to senators, businessmen, terrorists, or China. Let’s look at an example: Northrop Grumman Corporation gave out $543 million in dividends in 2011 (91% of which was from U.S. government contract spending). Any wealthy individual (even a terrorist) with 4.9% of the stock could receive $27 million of that before having to file with the SEC. That payment dwarfs even the CEO’s compensation and is invisible to the public. Someone who owned 4.9% of the stock of each of the top ten companies could have landed $123 million from the U.S. government in 2011 alone – invisibly – simply for being wealthy (that’s more in one year to one person than the typical American could earn working full-time for more than 2,000 years). Is this happening? I have no idea; there’s no way to know. And that in itself is disturbing.

This is how it looks: knowing that direct payments from the government are under public scrutiny, greedy people have pushed for privatization, itself not a bad thing, but for the purpose of hiding the money from the public eye so that the wealthy could anonymously reap the rewards of a national tax. Does this sound more like something that King Benjamin would do or King Noah?

Solution

The solution is actually very simple. Federal funds should be used to benefit all. No federal employee should receive more than their fair share, and neither should any contractor. Specifically, the federal government should not pay anyone more than the national median full-time income, and should not contract with any organization which itself pays anyone more than the national median full-time income. Because this is impossible to determine for publicly traded corporations, the federal government should no longer contract with any publicly traded organization. Furthermore, each of the subcontractors of these contractors should have the same requirement. State and local governments should follow suit (substituting the median incomes for their respective areas).

This is the system demanded by a true democracy. Any increase in the ratio of government payments to median earnings moves us down the scale towards King Noah. On the other hand, since the current ratio is more than 300:1, anything less than that would be an improvement. If we demand that the highest paid government worker and governmentally-funded portion of private worker/shareholder earn no more than 5 times the national median full-time income (which would end up being about $200,000, or about the value of the outrageous salaries cited by Fox News), we would be well on our way back to the King Benjamin side of the spectrum. Furthermore, having the federal government lead the way rather than blindly following the private sector would go a long way towards setting a new standard for income equality across the nation.

One thought on “A latter-day saint’s perspective on leadership compensation

  1. Victoria Paulsen

    It really gets interesting when you write about Government Pay. “Taking the amount each receives from the government into account, the U.S. government paid each CEO up to $17.7 million dollars in salary and bonuses in 2011. That’s more in one year than the typical American could earn working full time for 400 years.”
    And later you say that stockholders (including politicians) of up to 5% don’t have to report, so could be earning millions more.
    You need to get at least this part out to lots of people who can publicize it and raise Cain (do we want to raise Cain? Where does that saying come from?).

    Reply

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