BUSINESS ETHICS AND

CORPORATE GOVERNANCE
Assignment Submission

Submitted To:
Dr. S.K. Dixit
Submitted By:
Kishan Vora (167/2018)
Article : End Bloated salaries in the Non-profit Sector

Link: https://ssir.org/articles/entry/end_bloated_salaries_in_the_nonprofit_sector

Moral Values:

Any code of ethics is built on a foundation of widely shared values. The values of the non-proft
sector include:

• Commitment to the public good

• Accountability to the public
• Commitment beyond the law
• Respect for the worth and dignity of individuals
• Inclusiveness and social justice
• Transparency, integrity and Honesty
• Responsible stewardship of resources

Analysis:

Globally, Organizations are concerned toward people at the top of the income hierarchy, and
indifferent toward those in the middle and at the bottom of the hierarchy. According to The
Economic Policy Institute, U.S. the C.E.O.s of the largest 350 companies in the United States were
paid on average 300 times as much as their average employee. And the non-profit sector, given that
it competes for talent with the for-profit sector, isn’t going to be entirely exempt from the trend.

Historically, the mere assumption of a Non-profit organization being a moral actor was enough to
secure legitimacy for operating in the space of international development. However, it is becoming
evident that claiming moral legitimacy is no longer good enough – claims must be validated.

In Non-profit organization the amount people get paid is a moral matter, as well as social, economic
and political – and one that needs to be openly discussed.

Non-profit organization is obliged to serve its mission as well as it can with the resources it can
gather. To do so, it needs good staff and good management — which requires it to be mindful of
what is the average pay for people with the skills it needs. (Non-profit organizations typically do
comparative analyses of salaries in their sector when considering raises for top management.) At the
same time, income is just one factor that draws employees; often staff members will work for less
when they find the work genuinely rewarding.
Especially given the nature and purpose of non-profit organization, the situation sounds worrisome,
and it might indeed have been a good idea to appeal to those at the top to accept cuts in salary in
order to reduce the number of front-line employees who were let go.

None of these considerations, however, prove that the leadership makes the wrong decision. When
the budget shrinks, personnel decisions have to take account of the employment market. Suppose
cutting CEO’s perks or pay would incline her to take a job elsewhere. The cost to your organization
of finding a new one might mean that it wasn’t worth the risk. A fixed, across-the-board reduction in
salary, defined in percentage terms, might simply produce an organization with dissatisfied
employees waiting for a better opportunity. It’s conceivable, too, that the core competences of the
organization lie in the best-paid people and that the less well paid would be easier to replace if and
when funds return.

Summary:

There are majorly two problems associated with providing higher salaries to employees of top
hierarchy:

1. Unequal distribution of income between employees of top and bottom hierarchy

2. Non-profit organization is incurring opportunity cost of utilizing this amount for better cause

• The inequality in rewards between top and bottom is ultimately a structural problem that
requires solutions. Several countries in Europe have chosen to deal with it by having higher
taxes and more generous transfers to the less well off than we do, ensuring that their
income inequality is relatively much less. Those lower-paid people laid off by your
organization would have better unemployment insurance there, too
• The decision makers of the salaries of the top management should be motivated to respect
the values such as accountability to public and responsible stewardship of resources in
allocation of income to the workforce.