A Moral Argument Against Extravagant Pay
- Karl Johansson
- 17 nov. 2025
- 5 min läsning
Paying CEOs hundreds of millions of dollars creates vert warped incentives.
Elon Musk's latest pay package from Tesla has been in the news lately for potentially netting him a trillion dollars. He probably won't get all that money, but the fact that the shareholders voted for it is insane. Most CEO's don't get billions let alone a trillion dollars, they are often paid millions of dollars, hundreds of times more than the average worker. That these figures are absurd is a well known fact, and while there is always the theoretical defence that having the best leader for your organization is priceless, there is no way to design a double blind controlled experiment to verify how much better a CEO is compared to another. The point is not to trod well covered ground and make the basic argument that CEO pay is absurd and drastic income inequality caustic to democratic societies, instead I want to make a novel argument: that there is a moral-economic argument against extravagant pay.
I argue that the worst outcome from extravagant pay for those commanding the highest positions in large corporations is that it creates powerful incentives to think short term. If becoming a C-suite executive holds the promise of boosting your income by an order of magnitude then it becomes easy to argue that it is necessary or right to do what is required to get that position. Any immoral act, or even act which creates future problems and short term wins becomes trivial to rationalize if the payout is sufficiently huge. It is like those memes where you are given a moral dilemma along the lines of ‘would you punch your sibling for 162 trillion dollars?’
It is common in our populist age for people to allege that leaders in business and politics are all corrupt or immoral people, often with the extension that their social position is all the needed proof of immorality, after all only immoral people are able to climb the greasy pole. But the reality is probably worse: the extreme income inequality which often manifests as discrete jumps between “normal” ranges of pay and “elite” levels of pay contingent on holding a sufficiently important job creates a powerful incentive to be morally flexible. Returning to our moral dilemma, would you bend the rules to meet a key performance indicator target at work if doing so might give you a 1350% pay increase?
Moral integrity cannot be judged in extreme conditions. Killing in war time is not the same as killing in peace time, and neither is causing pain simply for the fun of it the same as causing pain under duress. If we hold those elementary if extreme examples to be true, should it not follow that moral questions do not arise in a vacuum. I’m not setting out to exonerate or defend business leaders, the point is that to create a more moral society one should strive to create conditions under which it is easy and natural for people to act morally.
In the increasingly winner-takes-all economic model the West has adopted since the advent of Thatcher and Reagan and the market revolution we have inadvertently created a business environment where doing the right thing or what is best in the long term can cost people unfathomable amounts of cold hard cash. Resigning in protest, taking a stand, and prioritizing tomorrow over today are acts difficult to justify if it means the difference between being able to provide for your family or being able to provide for your descendants such that they will never have to work a day in their lives.
Consider the so-called effective altruism movement which had some high profile adherents in Silicon Valley. It is a moral philosophy implicitly premised on the high level of income inequality in American society. Instead of thinking that a moral person is someone who helps others and generally acts morally it supposes that a moral person is someone who has a large positive impact, often through philanthropic donations. The stated model for a good person according to effective altruism is someone who makes so much money that they can afford to give a lot of money to effective charities. Which is a philosophy which absolves its adherents from any guilt stemming from how they made their money so long as they give much away later. It is a moral philosophy which only makes sense in our current warped age of extravagant inequality.
The most famous, now infamous, effective altruist is of course Sam Bankman-Fried, the crypto wunderkind who played League of Legend during work presentations. Bankman-Fried was convicted for wire fraud, wire fraud conspiracy, securities fraud, securities fraud conspiracy, and money laundering. But to be fair, he did donate a lot of money!
It should be clear that effective altruism is a dodgy moral philosophy. It encourages people to act immorally by promising absolution after their fortune is made without reckoning with the mathematical fact that not everyone can be wealthy (as wealth stems from owning a large share of total wealth and thus can only be defined relatively, never absolutely). If it were to be widely adopted it would lead a lot of people to act immorally without ever becoming wealthy enough to weigh up their bad acts. It therefore cannot be treated as a serious moral philosophy, only as a bad faith attempt to justify one’s actions.
The point of discussing effective altruism is to point out that effective altruism-like moral reasoning is an easy trap to fall into in a winner-takes-all economy. The fact that a moral philosophy sprang up to retroactively justify the behaviour of the mega wealthy is a sign that these questions are not hypothetical, that things have changed enough that new models were needed to navigate a new environment.
If you liked this post you can read a previous post about internet platforms here or the rest of my writings here. I also have a section for longer reads I call essays here, I particularly recommend my essay on Silicon Valley and AI called 'No Acoustic Guitars in Silicon Valley'. It'd mean a lot to me if you recommended the blog to a friend or coworker. Come back next Monday for a new post!
I've always been interested in politics, economics, and the interplay between. The blog is a place for me to explore different ideas and concepts relating to economics or politics, be that national or international. The goal for the blog is to make you think; to provide new perspectives.
Written by Karl Johansson
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